Japan slips to the world’s fourth-largest economy, behind the US, China and now Germany

Japan has slipped to the world’s fourth-largest economy as government data released Thursday showed it fell behind the size of Germany’s in 2023.

The numbers highlight how the Japanese economy has gradually lost its competitiveness and productivity while the population shrinks as Japanese people age and have fewer children, analysts say.

Japan fell from the second-ranked economy behind the US to the third-largest in 2010 as China’s economy grew. The International Monetary Fund had forecast Japan’s fall to fourth.

The comparisons among nations’ economies look at nominal GDP, which doesn’t reflect some different national conditions, and is in dollar terms.

Japan’s nominal GDP totalled US$4.2 trillion last year, or about 591 trillion yen. Germany’s, announced last month, was US$4.4 trillion, or US$4.5 trillion, depending on the currency conversion.

For the latest October-December quarter, the Japanese economy shrank at an annual rate of 0.4 per cent, and minus 0.1 per cent from the previous quarter, according to Cabinet Office data on real GDP. For the year, real GDP grew 1.9 per cent from the previous year.

Real gross domestic product is a measure of the value of a nation’s products and services. The annual rate measures what would have happened if the quarterly rate lasted a year.

Both Japan and Germany built their economies through strong small and medium-size businesses with solid productivity. In contrast to Japan, Germany has shown a solid economic foundation on the back of a strong euro and inflation. The weak yen also works as a minus for Japan.

The latest data reflect the realities of a weakening Japan and will likely result in Japan’s commanding a lesser presence in the world, said Tetsuji Okazaki, professor of economics