Japan has slipped to the fourth-largest economy globally, falling behind Germany in 2023. Japan's nominal GDP was $4.2 trillion, while Germany's stood at $4.4 trillion. The Japanese economy contracted 0.4% in the October-December quarter, marking two consecutive quarters of shrinkage and hinting at a technical recession. The unexpected downturn challenges earlier expectations of over 1% GDP growth in Q4.
Furthermore, the International Monetary Fund (IMF) had previously forecasted Germany overtaking Japan as the world's third-largest economy, with the final ranking to be confirmed upon the publication of their respective economic growth figures. The decline is partly attributed to the yen's 9% fall against the US dollar in 2023, impacting Japan's GDP in dollar terms. However, the yen's weakness has benefited Japanese exports by making them more competitively priced.
Despite economic challenges, Tokyo's stock market, Nikkei 225, recently crossed 38,000, reaching levels not seen since 1990. The IMF's deputy head highlighted the currency factor and suggested a potential recovery in the yen could alter the ranking.