Will Japan Fall Out of the World's Top Five Economies? India and UK to Overtake One After Another

IMF World Economic Outlook GDP Projections
Japan Projected to Fall Next Year, Overtaken by India and the United Kingdom

Japan's economy is expected to be overtaken by India and the United Kingdom next year, dropping to sixth place globally. The reasons are low growth and the yen's chronic weakness.

Japan's Yomiuri Online reported on the 13th local time, citing the latest World Economic Outlook released by the International Monetary Fund (IMF), that Japan's economy is expected to fall from fourth place globally to sixth next year.

A bustling street in Harajuku, Japan. AFP-Yonhap News.

The IMF publishes its economic outlook for the current year and the following year each October. According to IMF data, Japan's nominal gross domestic product (GDP) is projected to total $4.3419 trillion this year, roughly on par with the United Kingdom's $4.2684 trillion. They rank fourth and fifth globally, respectively. India, in sixth place, recorded $4.0602 trillion.

Next year, however, the rankings for fourth through sixth place are expected to be completely reshuffled, with India at $4.5211 trillion, the United Kingdom at $4.4889 trillion, and Japan at $4.4676 trillion. India, an emerging economy, has recorded high real growth of 7% to 8% on average each year. The United Kingdom is expected to maintain a higher growth rate than other advanced European economies, benefiting from factors such as increased investment in artificial intelligence (AI). Japan, by contrast, has a low economic growth rate, and the yen continues to weaken against the dollar.

Nominal GDP, a measure of a country's economic strength, is calculated by converting each country's currency into dollars after combining real growth with the GDP deflator, which measures the overall price level of the goods and services produced in a country. In other words, for Japan to hold on to its position among the world's five largest economies, both the yen and economic growth must rebound.

After World War II, Japan leveraged its rapid economic growth to become the world's second-largest economy in 1968. However, after being overtaken by China in 2010, it continued to slip, ceding third place globally to Germany in 2023. Japan's fall from the world's fifth-largest economy will be the first such drop in 67 years, since 1960.

The IMF said the global economy this year had "offset the negative effects of rising energy prices, thanks to the momentum of AI demand." It also warned that "countries highly dependent on resource imports and facing persistent currency weakness will need to manage inflation and exchange-rate volatility effectively to maintain the size of their economies."

This content was produced with the assistance of AI translation services.