IMF expects Japan’s GDP to fall to fifth in the world after India by 2025; The Japanese economy continues to decline

Japan’s nominal gross domestic product will be overtaken by India’s and fall from fourth in the world to fifth next year, according to International Monetary Fund projections.

The April IMF report projected that India’s GDP will reach $4.339 trillion by 2025, while Japan’s GDP will reach $4.310 trillion. The 2025 timing is a year earlier than previous projections, reflecting the yen’s depreciation.

With over 1.4 billion inhabitants, India has the largest population in the world and is experiencing high economic growth. According to the IMF, India’s real GDP growth in 2023 was 7.8%, while Japan’s was 1.9%.

In addition to the country’s strong domestic demand, the Indian government has encouraged foreign companies to bring their production to India. India’s GDP is expected to surpass Germany’s by 2027 and rise to third place.

Japan dropped to the fourth largest economy in the world in 2023, after Germany.

In 1968, during a period of high economic growth, Japan overtook West Germany to become the world’s second largest economy. However, China overtook Japan in 2010, following a prolonged recession in Japan following the collapse of the bubble economy.

Nominal GDP is influenced by international exchange rates and stimulated by rising prices.

On April 29, the yen temporarily fell to ¥160 against the dollar, its weakest level in about 34 years. The yen has weakened against the dollar by as much as ¥20 from earlier this year.

The decline of Japan’s economy also reflects the country’s long-term stagnation.

Companies have responded to ongoing deflation by prioritizing cost cuts and have failed to adequately invest profits domestically.

“With the weak yen and the current recovery from deflationary trends, companies should increase domestic investment and build a structure of economic growth,” said Keiji Kanda, senior economist at the Daiwa Institute of Research.