Japan slips to the world's fourth-largest economy

TOKYO

Japan has slipped to the world’s fourth-largest economy, as government data released Thursday showed it fell behind 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 U.S. to the third-largest in 2010 as China's economy grew. 

Japan’s nominal GDP totaled $4.2 trillion last year, or about 591 trillion yen. Germany’s, announced last month, was $4.4 trillion, or $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 percent, minus 0.1 percent from the previous quarter, according to Cabinet Office data on real GDP. For the year, real GDP grew 1.9 percent from the previous year.

Both Japan and Germany built their economies through strong small and medium-sized 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 at the University of Tokyo.

“Several years ago, Japan boasted a powerful auto sector, for instance. But with the advent of electric vehicles, even that advantage is shaken,” he said.