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Germany to surpass Japan this year, becoming the third-largest economy in the world

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Germany to surpass Japan this year, becoming the third-largest economy in the world

Forumul Economic Regional Moldova 2024 – Vatra Dornei, 4–6 iulie

Germany’s economy is expected to surpass that of Japan this year, becoming the third-largest economy in the world, due to the depreciation of the yen against the dollar and the euro

The latest IMF projections estimate Germany’s nominal Gross Domestic Product (GDP) at $4.43 trillion in 2023, compared to $4.23 trillion for Japan.

On October 3rd, the Japanese currency continued its depreciation against the US dollar, surpassing the symbolic threshold of 150 yen, leading to speculation about the possibility of a new intervention by the Bank of Japan to support the yen. At this moment, the euro is close to the 160 yen mark. The last time the euro traded at 160 yen was in August 2008.

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The depreciation of the Japanese currency is primarily due to fundamental differences in monetary policy. The US Federal Reserve (FED) and the European Central Bank (ECB) have raised interest rates to counter inflation, while officials at the Bank of Japan have preferred to maintain stimulus measures after years of deflation.

While the Fed and ECB are expected to keep interest rates unchanged in future monetary policy meetings, these developments put pressure on the yen. Analysts do not expect the end of the period of negative interest rates in Japan until the end of the year.

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However, the figures indicate a more stable long-term growth in Germany, which puts pressure on authorities in Japan to adopt new support measures.

“It is true that Japan’s growth potential remains low. We would like to regain lost ground over the past 20 or 30 years through new support measures,” responded Japanese Economy Minister Yasutoshi Nishimura when asked about the IMF projections.

IMF data shows that the Germans are better off than the Japanese. The average per capita Gross Domestic Product in Germany is estimated at $52,824, compared to $33,950 in Japan.”

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