Due to the depreciation of the Japanese yen, it is expected that the German economy will replace Japan as the world's third largest economy in 2023.
According to the latest forecast from the International Monetary Fund (IMF), Germany's nominal gross domestic product (GDP) is estimated to be $4.43 trillion this year, while Japan is expected to be $4.23 trillion.
At the time of the above forecast, the US dollar/Japanese yen exchange rate was on the brink of collapse, approaching the 150 level; The euro/yen exchange rate is approaching the level of 160, and the last time it reached 160 was in August 2008.
The depreciation of the Japanese yen leads to a decrease in GDP converted into US dollars. In addition, nominal GDP is affected by price fluctuations, so Germany's higher price increase than Japan is also reflected in nominal GDP.
Fundamental differences in policies
The weakness of the Japanese yen is largely caused by fundamental differences in monetary policy. The Federal Reserve and the European Central Bank have raised interest rates from pandemic lows to cope with inflation; After years of deflation, the Bank of Japan still maintains its stimulus model and seeks to drive price growth.
Although the Federal Reserve and the European Central Bank are expected to keep interest rates unchanged at their upcoming meetings, expectations that borrowing costs will remain high for an extended period of time may continue to put pressure on the yen.
The Bank of Japan will hold a meeting next week, and there is speculation that the Bank of Japan may adjust its control over bond yields. However, it is widely expected that the negative interest rate policy will not end until next year.
Various data also indicate that Germany's long-term growth is more stable, which has made Japanese policymakers busy considering the details of the latest economic stimulus plan.
Japanese Economy Minister Yasuo Nishimura stated on Tuesday (October 24th) when asked about the IMF's estimates& Quot; Japan's growth potential is indeed lagging behind and still sluggish, and we hope to regain what has been lost in the past 20 to 30 years. We hope to achieve this goal through measures such as the upcoming package plan
Japanese Prime Minister Fumio Kishida stated on Monday (23rd) that the economic stimulus package includes extending energy subsidies, aimed at helping alleviate the cost of living contraction caused by Japan's most severe inflation in decades. He stated that the government will also take measures to ensure that the momentum of wage increases remains unchanged, while also implementing some form of tax reduction measures.