The International Monetary Fund (IMF) projected Germany’s 2023 nominal Gross Domestic Product (GDP) at $4.43 trillion, compared to Japan’s estimated at $4.23 trillion. In addition, the average GDP per person in Germany is projected at $52,824, compared to Japan at $33,950 per person.
This projection sits at the 33-year weakest yen against the US dollar, while the exchange rate to a single euro is at 160 yen, which is also never seen since 15 years ago. The yen weakness is fundamentally caused by policy rate differences between other countries’ central banks, as Japan kept its policy rate close to zero and dipped slightly into the forbidden zone of negative interest rate, in order to stimulate a deflating economy for many years.
In recent years, many central banks hiked their rates sharply to counter inflation. Currently, the US Fed’s rate is over 5% and the EU central bank’s rate is 4.5%, which is considered much more than the Bank of Japan at around 0%. As long as this direction persists, it’ll incentivise money savers and investors to move their money out of Japan, and seek other countries that have higher return rates or invest in faster-growing economies.
“It’s true that Japan’s growth potential has fallen”, and “We’d like to gain the ground lost over the past 20 or 30 years.” Yasutoshi Nishimura, Japan’s economy minister, said on Tuesday about IMF projection as he mentioned the upcoming measures packages.
Meanwhile, Japan’s PM, Fumio Kishida said a day earlier that the package would include energy subsidies to ease cost of living from the inflation, while keeping wage momentum with some form of tax reduction.
