Germany is expected to overtake Japan in 2023. This is happening because the Japanese currency, the yen, is losing value compared to the US dollar and the euro. According to the International Monetary Fund, Germany’s total economic output (Gross Domestic Product) is estimated to be $4.43 trillion this year, while Japan’s is $4.23 trillion.
Why Yen is Losing it’s Value?
This situation is partly because the yen’s value compared to the euro is close to a low point, and it’s not far from its lowest value against the US dollar in 33 years. This decline in the yen’s value started because of differences in how central banks, like the Federal Reserve in the US and the European Central Bank, and the Bank of Japan are managing their monetary policies.
The Federal Reserve and the European Central Bank have raised interest rates to control rising prices (inflation), but the Bank of Japan has kept its interest rates low to encourage price growth after many years of falling prices (deflation). This difference in monetary policies has contributed to the decline in the yen’s value compared to other currencies.
While the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to keep interest rates the same in their upcoming meetings, the belief that borrowing costs will remain high for a longer time is likely to put pressure on the Japanese yen. The Bank of Japan (BOJ) is meeting next week, and there is some speculation that they might make some adjustments to how they manage bond yields, but it’s not widely expected that they will raise their negative interest rates until next year.
Nevertheless, these statistics also suggest that Germany is likely to experience more consistent long-term economic growth. This could be a concern for Japanese policymakers as they work on the details of their latest economic plan.
What Japan’s ministers said?…
Japan’s economy minister, Yasutoshi Nishimura, acknowledged that Japan’s potential for economic growth has fallen behind and is currently slow. He mentioned that they want to recover the lost ground from the past two to three decades and plan to do so through upcoming economic measures.
Prime Minister Fumio Kishida mentioned that their economic stimulus package includes extending energy subsidies to help people cope with the high cost of living due to strong inflation in Japan. He also stated that there would be efforts to ensure that wages continue to increase, along with some form of tax reduction.
Germany’s income will be higher
The IMF figures also indicate that people in Germany are expected to have a higher average income compared to those in Japan. The projected average Gross Domestic Product per person in Germany is $52,824, whereas in Japan, it’s $33,950.
India to Overtake Japan in 2030 and will become 3rd Largest Economy!
India, currently ranked as the world’s fifth-largest economy, is well on its way to surpassing Japan and becoming the third-largest global economy by 2030. This projection comes from the latest report by S&P Global Market Intelligence.
Growing Rapidly
After experiencing two years of rapid economic growth in 2021 and 2022, the Indian economy has continued to grow strongly throughout 2023. In fact, India’s Gross Domestic Product (GDP) is expected to grow between 6.2 percent and 6.3 percent in the fiscal year ending in March 2024, making it the fastest-growing major economy during this fiscal year. Notably, India’s economy surged by an impressive 7.8 percent in the April-June quarter.
Upcoming years Overlook
S&P Global’s report points to a positive short-term economic outlook, with ongoing rapid expansion for the rest of 2023 and 2024, driven by strong domestic demand.
The report highlights the substantial influx of foreign direct investments (FDI) into India over the past decade, reflecting the country’s favorable long-term growth prospects. This is supported by a youthful demographic profile and rising urban household incomes.
- India’s GDP
The report predicts that India’s nominal GDP, measured in US dollars, will increase from $3.5 trillion in 2022 to $7.3 trillion by 2030. This rapid growth will position India as the second-largest economy in the Asia-Pacific region, surpassing Japan. India had already exceeded the GDP of the UK and France by 2022, and by 2030, it is expected to surpass Germany.
- Current Scene
As of now, the United States remains the world’s largest economy with a GDP of $25.5 trillion, representing a quarter of the world’s GDP. China is the second-largest economy with a GDP of around $18 trillion, nearly 17.9 percent of the world GDP. Japan is currently the third-largest economy with a GDP of $4.2 trillion, and Germany is fourth with a GDP of $4 trillion.
Long- Term
S&P Global lists several key drivers that support India’s long-term economic outlook. These include a rapidly growing middle class, which drives consumer spending, a thriving domestic consumer market, and substantial investments from multinational corporations in various sectors, including manufacturing, infrastructure, and services.
India’s ongoing digital transformation is expected to accelerate the growth of e-commerce, reshaping the retail consumer market in the coming decade. This transformation has attracted global technology and e-commerce giants to invest in the Indian market. The report projects that by 2030, over 1.1 billion Indians will have internet access, more than doubling from the estimated 500 million internet users in 2020.
India’s robust FDI inflows, observed over the past five years, continue to gain momentum, even during the pandemic years of 2020-2022. Investments from global technology multinationals (MNCs) and a surge in FDI inflows from manufacturing firms are contributing to this growth.
Looking ahead, India is expected to remain one of the world’s fastest-growing economies over the next decade. This makes it a crucial long-term growth market for multinational companies across various industries, including manufacturing, services, banking, insurance, asset management, healthcare, and information technology.