TOKYO (AP) — Japan's economy shrank in the final quarter of 2023 and is now the world's fourth largest, after falling behind Germany.
the government reported economy Real GDP contracted at an annual rate of 0.4% from October to December, but rose by 1.9% for all of 2023, according to Cabinet Office real GDP data released on Thursday. It contracted by 2.9% from July to September. Two consecutive quarters of economic contraction are considered an indicator that the economy is in a technical recession.
Japan's economy was in second place until 2010, but it was then overtaken by China. Japan's nominal GDP last year was $4.2 trillion, while Germany's was $4.4 trillion or $4.5 trillion, depending on currency conversion.
Since the comparison of nominal GDP is based on dollars, the weaker yen was the main reason for the decline to fourth place. But Japan's relative weakness also reflects a declining population and lagging productivity and competitiveness, economists say.
Real gross domestic product is a measure of the value of a country's products and services. The annual rate measures what would happen if the quarterly rate continued for one year.
Historically, Japan has been hailed as an “economic miracle,'' rising from the ashes of World War II to become the second largest economic power after the United States. It lasted from the 1970s to her 1980s. However, for most of the past 30 years, the economy has experienced only modest growth at times, and has remained largely sluggish since the financial bubble began to burst in 1990.
Both Japan's and Germany's economies are supported by strong small and medium-sized enterprises with solid productivity.
Like Japan from the 1960s to the 1980s, Germany dominated the world market for high-end products such as luxury cars and industrial machinery for most of this century, selling so many products around the world that exports accounted for half of its economy. and made great progress.
However, one of the economies is worst performance in the world Last year, it shrank by 0.3% in the previous quarter.
british Similarly, he signed a contract at the end of last year. Britain reported It was announced on Thursday that the country's economy entered a technical recession from October to December, contracting by 0.3% quarter-on-quarter. On a quarterly basis, this was a decrease following a 0.1% decrease in the previous three months.
Japan's population, an island nation with relatively few foreign residents, has been shrinking and aging in recent years, while Germany's population has grown to nearly 85 million as immigration offsets a low birth rate.
Tetsuji Okazaki, a professor of economics at the University of Tokyo, said the latest data reflects the reality of a weakening Japan, and that Japan's presence in the world is likely to decline.
“A few years ago, for example, Japan boasted a strong automobile sector. But with the advent of electric cars, even that advantage has been shaken,” he said. “Many factors are still unclear,” he said, “but looking ahead to the next few decades, the outlook for Japan is bleak.”
The gap between developed and emerging countries is narrowing, and it is likely that India will overtake Japan in terms of nominal GDP in a few years.
The United States remains the world's largest economy, with a GDP of $27.94 trillion in 2023, compared to China's $17.5 trillion. India's size is about $3.7 trillion, but it is growing at a furious rate of about 7%.
Immigration is one option to solve Japan's labor shortage problem, but the country is relatively sparse in accepting foreign workers except for temporary stays, leading to criticism of discrimination and lack of diversity.
Another option, robots, is slowly being introduced, but not enough to completely compensate for the shortage of workers.
Another major factor in Japan's slowing growth is that households are holding back on spending due to stagnant wages. At the same time, companies are investing heavily in fast-growing economies overseas rather than in aging and shrinking domestic markets.
Marcel Thieliant of Capital Economics said in a commentary that consumer spending declined for three consecutive quarters last year, and that growth will continue to slow this year as the household savings rate turns negative. Stated. “Our forecast is for GDP growth to slow from 1.9% in 2023 to around 0.5% this year.”
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Yuri Kageyama is in X: https://twitter.com/yurikageyama
