(MENAFN- Asia Times) TOKYO – Thirteen years on, the Japanese still haven't quite gotten over China surpassing their economy in gross domestic product (GDP) terms. Now here comes Germany with a fresh blow to the national psyche.
This week, the International Monetary Fund calculated that Germany's nominal GDP is on track to surpass Japan's this year. That would push Japan from No 3 to No 4 globally.
If you think Prime Minister Fumio Kishida 's approval ratings are low now – a mere 29% – just wait until this changing of the economy guard makes banner headlines. It will remind 126 million people that the ruling Liberal Democratic Party continues to dither as Japan's global footprint shrinks.
Economists are skilled at finding creative ways to explain away such inflection points. We're only talking about GDP in US dollar terms, some argue. Others say vagaries surrounding changes in prices of goods and services muddy the picture.
And to this day, Tokyo stresses per capita income levels - which are markedly higher in Japan - are the most important metric vis-a-vis China's economy.
But there's no masking that the fall from No 3 to No 4 speaks to the weakness of the Japanese economy and the collateral damage from a now backfiring 25-year-old weak yen policy.
It's worth noting, too, that German Chancellor Olaf Scholz's economy isn't exactly thriving in the homestretch to 2024. The IMF thinks growth in the US, UK, France and Spain will top Germany over the next five years.
In mid-August, The Economist argued Berlin had gone“from European leader to laggard” and asked,“is Germany once again the sick man of Asia?” Ten days later, a Wall Street Journal headline proclaimed“Germany Is Losing Its Mojo. Finding It Again Won't Be Easy.”
Economists can debate where Germany is, circa late 2023. But it's hard to refute that from the mid-2000s to the late 2010s, Berlin showed Tokyo how it's done in terms of thriving economically despite strong exchange rates .
German executives and policymakers“didn't complain about exchange rates – they figured it out and restructured accordingly,” explains economist Stephen Jen, managing partner at SLJ Macro Partners. What's more, as the global economy grew increasingly chaotic after the mid-2000s, Germany“didn't fight it,” Jen notes. Berlin“went with it” and raised its economic game accordingly.
Over time, Germany – then under the leadership of Gerhard Schroder followed by Angela Merkel – found ways to innovate and adapt to the fast-changing forces of globalization despite high labor costs and financial crises.
Better than most peers, Germany balanced tensions between increasing competitiveness and maintaining maximum employment, even amongst the“Mittelstand,” the medium-sized enterprises that long formed the backbone of German industry.
Germany's SMEs are highly competitive; Japan's, less so. Image: Twitter Screengrab
In 2014, economist Sebastian Paust probably didn't know how right he was when arguing in an Asian Development Bank report that the Mittelstand was a“model” not just for Japan but emerging Asian economies, too.
MENAFN26102023000159011032ID1107308475
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.