Ahead of Germany

Japan becomes the world’s third-largest economy

Employees at a storage factory in Japan (archive image)

(Bild: Kioxia)

Germany will have to relinquish its newly acquired title as the world's third-largest economy this year. The industrialized countries' association OECD predicts that Japan will overtake Germany. The reason for this is exchange rate movements.

"The normalization of monetary policy will lead to higher interest rates this year and also to a slightly stronger yen again," said Robert Grundke from the OECD (Organization for Economic Cooperation and Development).

It was only last year that Japan lost its place as the world's third largest economy after the USA and China, although the country's economy grew by 1.9 percent. The yen currency was heavily devalued. "The strong interest rate differential has led to large capital outflows from Japan and a sharp depreciation of the currency of around 50 percent (...)," said Grundke.

Development only temporary
However, Japan's economy is growing more slowly than Germany's. Factors contributing to this include an ageing population, a lack of investment and a clinging to old industries. "Over the next few years, this will lead to Germany taking the place ahead of Japan." In around ten years, third place will then go to India, said Grundke. The country has a growing working population, many investments and increasing productivity.

"If you want to compare the standard of living of the population instead of the total amount of goods and services produced, you also have to take into account the size of the country's population." China and India are the most populous countries in the world. In terms of GDP in purchasing power parity per capita, however, they are among the poorer countries.