Last year, Japan’s economic growth rate recorded 1.9%, surpassing Korea’s growth rate for the first time in 25 years. This is because exports of companies with price competitiveness have increased significantly due to the ‘super yen’ effect. On the other hand, due to the decline in the value of the yen, nominal gross domestic product (GDP) converted to dollars fell to fourth place in the world, behind Germany.
The Japanese Cabinet Office announced on the 15th that “Japan’s real GDP growth rate last year was 1.9%.” Japan has shown continuous growth since 2021 (2.6%), the year after the spread of the novel coronavirus infection (Corona 19). This figure is 0.5 percentage points higher than Korea’s real GDP growth rate of 1.4% in 2023 announced by the Bank of Korea last month. This is the first time in 25 years that Japan has outpaced real GDP growth since 1998, when Korea suffered a foreign exchange crisis.
The reversal of economic growth rates in Korea and Japan was largely due to the record low yen phenomenon. The yen-dollar exchange rate will average 140.5 yen in 2023, a significant increase of nearly 10 yen compared to the previous year. This means that the value of the yen has fallen. In October last year, it broke through 150 yen, which is considered a ‘psychological resistance level’, and then recovered to the low 140 yen range, but this year it continued to rise and surpassed 150 yen again on the 14th.
When the value of the yen falls, not only does the price competitiveness of large Japanese companies, especially automobile companies, improve, but it is also effective in increasing tourists. In fact, the export sector led the overall economic growth rate last year, recording 3.0% compared to personal consumption (0.7%) or facility investment (1.3%).
Improved corporate performance due to favorable exports is also boosting the Japanese stock market. On the 15th, the Nikkei Stock Average, Japan’s representative stock index, closed at 38,157 yen, up 454 yen (1.2%) from the previous day. It exceeded 38,100 yen for the first time in 34 years since February 1990, during the ‘bubble economy’ era.
It is unclear whether the reversal in Korea-Japan growth rates will continue until the end of this year. This is because Japan’s real GDP growth rate in the fourth quarter of last year (October to December), which was also announced on this day, was negative compared to the previous quarter. On an ‘annualized’ basis, which assumes that this trend will last for one year, it was -0.4%, which was significantly below market expectations (1.4%). Reuters quoted Takuji Aida, chief economist at France’s Credit Agricole Bank, as saying, “There is a risk that the Japanese economy will contract again in the first quarter of this year due to the effects of slowing global growth, sluggish domestic demand, and the strong earthquake in Japan’s Noto Peninsula last month. “There is this,” he predicted.
The AG had a negative impact on Japan’s ranking of world economic size. Converted into dollars, Japan’s nominal GDP last year was $4.2 trillion, which was less than Germany’s ($4.4 trillion). It ranked 4th in the world economic size ranking, following the United States, China, and Germany. In 1968, Japan surpassed West Germany and ranked second in economic size after the United States, but fell to third place in 2010 due to the rapid rise of China. The Asahi Shimbun analyzed, “It seems likely that the weak yen phenomenon will continue for the time being, so it will be difficult to turn around (Germany) again this year.”
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.