GDP is about to be surpassed by Germany What's wrong with the Japanese economy

Recently, according to predictions from the International Monetary Fund, Japan's nominal GDP will drop from third to fourth in the world in 2023.

Forecast data shows that Japan's nominal GDP in 2023 is approximately $4.23 trillion, while Germany, which is about to surpass Japan, is about $4.43 trillion. Meanwhile, the IMF predicts that India will become the world's fourth largest economy by 2026, while Japan will decline to the fifth largest economy between 2026 and 2028.

It seems that after being overtaken by China in 2010 and downgraded to the world's third largest economy, Japan will be surpassed by Germany again this time. With the continuous boost of the Indian economy, the era of Japan's gross domestic product hitting five is also approaching.

Industry analysts believe that the significant depreciation of the yen, the long-term troubles of the "Japanese disease", and the lack of endogenous driving force for Japan's economic growth are the main reasons for Japan's ranking decline. If Japan cannot find effective ways to improve this situation, Japan's ranking will further decline.

The first is the depreciation of the Japanese yen. The New York Times pointed out that part of the reason for the slowdown in Japanese corporate growth is the weakness of the yen trend. Japan is highly dependent on imports for food and energy, and the depreciation of the yen has pushed up import costs, thereby exacerbating its domestic inflation level. The weak yen is a double-edged sword for the economy, although it can boost exports, it has also caused a huge impact on consumption and expenditure.

Secondly, it has been severely troubled by the "Japanese disease" for a long time. The "Japanese disease" refers to the phenomenon of long-term low growth and stagnation of the Japanese economy. This term was first proposed in the 1980s to describe the Japanese economy entering a period of long-term stagnation after decades of rapid growth.

The lack of demand is a fundamental characteristic of the "Japanese disease": in the context of global economic growth slowing down, Japan's overseas demand will also continue to shrink. Japan has long faced the problem of insufficient demand, with both consumers and businesses holding cautious attitudes towards investment and consumption, resulting in weak economic growth.

In addition, deflation is also an important factor, as falling prices can cause consumers to delay purchasing and corporate investment decisions, further suppressing economic growth. Senior Executive Economist Yoshiki Shinka from the Economic Survey Department of Japan's First Life Research Institute believes that as an important driving force for Japan's economic growth, sluggish equipment investment also brings uncertainty to future economic trends.

High unemployment rate is also an important feature of the Japanese disease. Due to economic stagnation, companies often choose to lay off employees to reduce costs when facing competitive pressure, leading to an increase in unemployment rate. This has also exacerbated economic problems, as the consumption capacity of the unemployed has decreased, further suppressing Japan's economic growth.

The aging population is also a key factor that cannot be ignored. Japan is facing an increasingly serious problem of aging population, insufficient labor supply, and increasing social welfare burdens such as pensions and healthcare, which pose challenges to economic development and fiscal stability.

The lack of endogenous motivation is mainly reflected in the lack of innovation. Taking the automotive industry that Japan has always been proud of as an example, in Japan, automotive companies directly employ over 5.3 million employees, accounting for over 5% of the total population and supporting over 15% of Japanese households. In the ranking of Japanese industrial enterprises, the automotive industry accounts for the top five profits.

Among the top 10 companies that generate profits, 7 are in the automotive industry.

It can be said that half of Japan's industry is the automotive industry, which is undoubtedly Japan's first pillar industry. However, in the context of the current global trend of new energy vehicles, traditional fuel powered vehicles have been deteriorating, and the "golden age" of Japanese cars in the world is gone forever. Although the Japanese government has a positive attitude towards the development of new energy vehicles, the slow response of Japanese car companies has made the situation almost uncontrollable, which has seriously dragged down Japan's economic pace.

The Japanese government is also trying to find ways to cope with the persistently sluggish economy. Japanese Prime Minister Fumio Kishida announced on the 23rd that a package plan will be introduced to alleviate the cost of living crisis for the people.

However, the Japanese people are not buying into this. Recent polls show that the support rate of the Kishida Cabinet is only 32.3%, setting a new low since taking office. However, as high as 58.6% of the public expressed "no expectation" of the government's upcoming economic measures.

Especially in the eyes of opposition parties, the plan proposed by Kishida in his policy speech is not highly feasible. Ichiro Ozawa, a member of the Constitutional Democratic Party, stated that in current Japanese society, the depreciation of the yen drives up prices, while wage growth cannot keep up with prices. "Kishida, including the quantitative easing policy continuously promoted by the previous government, is an important driver of this vicious cycle, and we have not seen any changes made by Kishida on this fundamental issue.