2023-11-03 23:24:16
Japan is on the verge of losing its third place on the podium of the world’s largest economic powers. Outpaced by Germany, the country of the rising sun owes this decline to its plummeting demographics. However, he is already promising to catch up, by considering a recovery plan.
While it was in third place among the world’s economic powers, behind the United States and China, Japan has just been overtaken by Germany, whose GDP is constantly increasing. The Asian giant’s GDP is expected to decline to $4,230 billion and is only expected to return to its 2020 level in 2028. Japanese Economy Minister Yasutoshi Nishimura announced a new recovery plan to compensate for the economic delay of country, recognizing that Japan’s real growth potential is lagging and remains limited.
Japan overtaken by Germany and soon by India
However, experts say Japan’s economic performance is currently undervalued due to the weakening yen, which has fallen 30% against the dollar since 2021. Natixis Asia Pacific Chief Economist Alicia Garcia Herrero explains that comparisons with the gross national product (GNP) would give more favorable results in Japan. Even though Japanese factories are operating at full capacity, local production capacities have not increased. This is due to the decline in population, which has led to a reduction in the workforce.
There is a serious shortage of labor in Japan. The country loses more than 800,000 inhabitants every year and many sectors find themselves without workers. There is a shortage of workers, nurses, masons… Companies cannot produce more, this is particularly the case for the giant Toyota, which, in 2022, exported 5% fewer vehicles. Economists explain this phenomenon by the aging of the population. It was also noted that job creation now takes place mainly in the services sector and particularly in segments with low added value, such as distribution.
On the other hand, Germany is performing incredibly well. Another Asian country should also benefit from Japan’s low growth rate: India. And for good reason, the IMF expects Indian GDP growth to exceed 6% from 2026 and estimates that India’s GDP will increase from $3.5 trillion in 2022 to $7.3 trillion in 2030. India is expected to occupy a prominent place on the economic podium by 2027.
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