Historic change on the global podium. The unexpected technical recession in Japan has lifted Germany to third place among the world’s largest economies, behind the United States and China. Years of low growth and Japanese deflation combined with the depreciation of the yen, which undermines its size when converted to dollars, have motivated the change.
In Japan, nominal GDP, which measures the value of production with market prices and takes inflation into account, increased by 5.7% in 2023, to $4.21 trillion, according to the preliminary report of its statistical office published this Thursday. The German price, for its part, rose 6.3%, to 4.46 billion, driven by high inflation.
The nominal statistics do not mean that more growth will occur: the same thing can be generated but at more expensive prices. Thus, since inflation is higher in Germany than in Japan, where prices have even fallen in recent years, ground is gradually being cut.
In Japan, local media have widely commented on the loss of its position, recalling that beyond the exceptional impact of the fall of the yen, negative factors such as demographic decline, the fall of the yen and chronically weak productivity intervene. In 2010 it already lost second place to China.
In real terms, with GDP at constant prices, Japan grew by 1.9% due to the growth in the first half of the year. In fact, in the second section it contracted and entered a technical recession, falling 0.8% quarter-on-quarter in the third quarter and 0.1% in the last. “What is most striking is the sluggishness of consumption and capital expenditure, fundamental pillars of domestic demand,” Yoshiki Shinke, executive economist at the Dai-ichi Life Research Institute, told Reuters.
The surprise comes despite the fact that the European country is not exactly going through its best moment, after its GDP contracted 0.3% in the fourth quarter, on the verge of recession after falling flat in the previous two. In this way, entering the podium is nothing to write home about. Especially since India could surpass both in a few years.
The data confirms the differences between the world’s main powers. While the US has grown by 3.1% in 2023, the euro zone advances barely one tenth. China is the only one that maintains the pace with a growth of 5.2%, although it does not clear up the doubts.
The situation is not better for the United Kingdom, which has surprisingly entered recession according to data published this Thursday. The British economy grew a meager 0.1% in 2023, the weakest expansion since 2009, with a drop of 0.3% quarter-on-quarter in the third quarter following the previous -0.1%.
In the last part of the year, the fall was widespread among the different sectors, since services registered a contraction of 0.2%, while production activities fell by 1% and construction by 1.3%.