India will overtake Japan in nominal GDP by 2025

Tokyo (Jiji Press) – India will overtake Japan in nominal gross domestic product in dollars by 2025, according to International Monetary Fund estimates released this month.

Japan’s nominal GDP in 2025 is estimated at $4,310.3 billion, while India’s is estimated at $4,339.8 billion.

The timing for India’s GDP to surpass Japan’s is a year earlier than the IMF forecast in October last year, reflecting further yen depreciation.

Japan’s economy would fall to the fifth largest in the world. Only in February did GDP data released by the Cabinet Office show that Japan would be overtaken by Germany in 2023, dropping to fourth in the world.

According to Cabinet Office data, the average dollar exchange rate in 2023 was ¥140.48. But in overseas trading on Friday, the dollar rose above ¥158 for the first time in about 34 years.

Behind India’s rise is not only the weaker yen, but also rapid economic growth. In 2023, India’s economy grew by 7.8 percent, much faster than Japan’s 1.9 percent.

India’s economic growth is driven by huge domestic demand as its population is expected to surpass China’s by 2023 and become the largest in the world.

“India is attracting money from advanced economies at a time when investment in China is being held back,” said Makoto Saito of NLI Research Institute.

Hideo Kumano of Dai-ichi Life Research Institute Inc. pointed out that the Japanese government and the Bank of Japan’s policies to weaken the yen should be blamed for the country’s low growth.

“Economic growth that depends on the depreciation of the yen has its limits,” Kumano said, noting the need to boost productivity through energy-saving efforts and by encouraging investment.