World's Biggest Economy: Germany Overtakes Japan In Third Position (Image: Unsplash/Christian Wiediger)

Germany overtakes Japan last year as the world”s third-biggest economy. As per the reports, India is likely to overtake both later this decade.

According to the figures released last month, Japan”s nominal 2023 gross domestic product in dollar terms was $4.2 trillion, whereas Germany“s was $4.5 trillion. The change in positions majorly reflect the downfall in the value of yen against the US currency wherein the former fall steeply by almost a fifth in 2022 and 2023, including around seven percent last year.

This happened partly because in an initiative to boost prices, the Bank of Japan has maintained negative interest rates which have increased borrowing costs to fight rising inflation.

Both economies heavily dependent on exports; however, Germany”s heavily export-dependent manufacturers have been heavily hit hard by rise in energy prices and Russia”s invasion of Ukraine.

Europe”s biggest economy has also been hampered by the European Central Bank increasing interest rates in the eurozone as well as uncertainty over its budget and chronic shortages of skilled labour, AFP reports.

Japan is also heavily reliant on exports, particularly cars, and its sales have been helped by the weak yen. However, the country is facing crisis more than Germany due to its worker shortages since its population falls and birth rates remain low.

In the data released on Thursday, Japan”s economy shrank 0.1 percent in the last quarter of 2023, where the market expectations demanded 0.2 percent growth.

Japan, slipping behind Germany will be a setback to the country”s self-esteem and adding pressure on unpopular Prime Minister Fumio Kishida. Besides, according to the International Monetary Fund, India”s economy, with an expanding young population, is projected to overtake Japan in the year 2026, and Germany in 2027.

(With inputs from AFP)