Germany has secured its position as the world’s third-largest economy, surpassing Japan, which unexpectedly slipped into recession. With a GDP of $4.5 trillion, Germany now ranks behind the United States and China in terms of economic size, narrowly ahead of Japan with a GDP of $4.2 trillion.
The impact of surging energy prices following Russia’s invasion of Ukraine has hit Germany’s export-dependent manufacturers hard. On the other hand, Japan, heavily reliant on exports, especially in the automotive sector, has benefited from a weak yen, making its exports more affordable, despite facing challenges in key markets like China.
Germany’s economic resilience has been notable, although both countries have experienced disruptions. Japan is grappling with more significant issues, including worker shortages due to a declining population and low birth rates. Economists anticipate that the economic gap between Germany and Japan will likely widen further.
Recent data revealed that Japan’s economy contracted by 0.1% quarter-on-quarter in the last three months, with a revised downward growth of negative 0.8% in the third quarter. These figures indicate that Japan entered a technical recession in the second half of 2023.
Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute, pointed out that despite facing population decline similar to Japan, Germany has managed to maintain consistent economic growth. He attributes this success to Germany’s proactive government policies, particularly since the 2000s, aimed at fostering a conducive environment for economic development.