Japan economy falls to world’s fourth largest

Japan’s economy is now the world’s fourthlargest after it contracted in the last quarter of

2023 and fell behind Germany.

The Government reported the economy shrank at an annual rate of 0.4 per cent in October to December, according to Cabinet office data on real GDP released yesterday, though it grew 1.9 per cent for all of 2023. It contracted 2.9 per cent in July-September. Two straight quarters of contraction are considered an indicator of a technical recession.

Japan’s economy was the second largest until 2010, when it was overtaken by China’s. Its nominal GDP totalled US$4.2 trillion ($6.89t) last year. Germany’s was US$4.4t.

A weaker Japanese yen was a key factor in the drop to fourth place, since comparisons of nominal GDP are in dollar terms. But Japan’s relative weakness also reflects a decline in its population and lagging productivity and competitiveness, economists say.

Real GDP 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.

Japan was historically touted as “an economic miracle”, rising from the ashes of World War II to become the second largest economy after the United States.

It kept that going through the 1970s and

1980s. But for most of the past 30 years the economy has grown only moderately at times, mainly remaining in the doldrums after the collapse of its financial bubble began in 1990.

Both the Japanese and German economies are powered by strong small and medium-size businesses with solid productivity.

Like Japan in the 1960s-1980s, for most of this century, Germany roared ahead, dominating global markets for high-end products like luxury cars and industrial machinery. Half its economy ran on exports.

But its economy, one of the world’s worst performing last year, also contracted in the last quarter, by 0.3 per cent.

Britain’s likewise contracted late last year. Britain reported yesterday that its economy entered a technical recession in OctoberDecember, shrinking 0.3 per cent from the previous quarter. That fall followed a 0.1 per cent fall in the previous three-month period.

The latest data reflect the realities of a weakening Japan, said Tetsuji Okazaki, professor of economics at the University of Tokyo.