Germany ranks third among the largest economies, ahead of Japan

For a long time, the order of the world's largest economies was: first the United States, then China, then Japan. Now Germany has moved from fourth place to third place – without having to do anything about it. Japan itself is responsible for this. The Japanese government said Thursday that nominal gross domestic product (GDP) contracted by 0.1 percent to $4.21 trillion in the fourth quarter of 2023. Due to a second consecutive negative quarter, Japan is now experiencing a technical recession. This means that the country now lags behind Germany's GDP of $4.46 trillion.

The reason for this is primarily the sharp decline in the value of the yen. Private consumption, which represents a large part of Japan's economic strength, also fell for the third time in a row and fell by 0.2 percent. Clothing stores and restaurants in particular have suffered. The country is also struggling with an aging population and there is hardly any immigration.

Between April and June 2023, Japan's GDP grew by 1.5 percent. The Bank of Japan, among others, was responsible for this, keeping its key interest rate low at negative 0.1% since 2016. Therefore, Japanese exports were relatively cheap and continued to increase, while expensive imports continued to decline.

Despite Germany's rise, things don't look much better here. Here too, GDP fell by 0.3% in the fourth quarter of 2023. The reasons for this include, among others, a decrease in investments in buildings and equipment. If the economy contracts again in the current first quarter, as Commerzbank's chief economist, Jörg Kramer, expects, Germany will also be in a technical recession. As in Japan, the problem will also develop in the future as the number of working-age people shrinks. Economists Rainer Kocchi and David E. Bloom said that economic growth will be lower by about 0.9% annually until 2050 than it would be if the population remained the same.

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