Japan has been eclipsed by Germany as the world’s third-biggest economy and has slipped into recession, according to data released Thursday, as the country battles a weak yen and an ageing, shrinking population.
Japan’s economy, now the world’s fourth-biggest, grew 1.9% in 2023 in nominal terms – meaning it is not adjusted for inflation – but in dollar terms its gross domestic product (GDP) stood at $4.2tn compared with $4.5tn for Germany.
The shift, coming more than a decade after it ceded second place to China, has been attributed to the yen’s sharp falls against the dollar over the past two years. A weaker yen eats into profits on exports when earnings are repatriated. The Japanese currency dropped by almost a fifth against the US dollar in 2022 and 2023, including a 7% fall last year.
While Japanese carmakers and other exporters have benefited from a weak yen – which makes their goods cheaper on the international market – the country’s labour crunch is worse than Germany’s. Private consumption, which accounts for more than half of all economic activity in Japan, fell 0.2% as households struggled with the rising cost of living and a fall in real wages.
Credit: theguardian.com
