"It's Not the Weak Yen"... Japan Faces Fall to 6th Globally, the Real Cause

Forecast to Fall to Sixth Place Globally Next Year, Overtaken by India and the UK
"Japan's Consumer Spending and Wages Have Barely Changed in 30 Years"
"Could Fall Out of the Top 10 After 2030"

Amid forecasts that Japan's economy will fall to sixth place globally next year, overtaken by India and the United Kingdom, one analysis has traced the cause to "30 years of stagnation."

Pedestrians walk past a stock market ticker board in Tokyo on the 15th, when Japan's Nikkei index plunged. EPA-Yonhap News

On October 18, a video titled "Why Japan's GDP, Once the World's Second-Largest, Fell to Sixth Place" was posted on the YouTube channel "Bakgane." Oh Sang, the channel's host, whose real name is Park Junsik, introduced a forecast by the International Monetary Fund (IMF) reported by Japan's Yomiuri Shimbun and said he believed there was a more fundamental cause than the weak yen. "The weak yen is not the cause," he said. "The key point is that while other countries' GDP grew, Japan remained stagnant for 30 to 40 years."

Consumers Who Don't Spend and Wages That Don't Rise... "30 Years of Stagnation"

The YouTube channel "Bakgane" analyzes the causes of Japan's economic decline. YouTube.

The first issue Park pointed to was private consumption, which accounts for the largest share of GDP. "People in Japan don't spend money," he said. "Even Japan's Cabinet Office figures show that private consumption was 254 trillion yen in 1994 and reached only 300 trillion yen in 2024, 30 years later - an increase of less than 50%." He added, "People need higher wages to spend more, but wages in Japan have not risen for decades since the recession. As a result, the country has fallen into a state of stagnation where people cannot spend even when they want to."

He cited Japan's distinctive employment culture as the reason wages have not risen. Park said, "Japan's job openings-to-applicants ratio is 1.18, which makes it look easy to find a job, but the system involves dividing the salary meant for one person among two or four people." He explained that this was the result of an implicit society-wide agreement to "all become a little poorer together" in order to maintain full and lifetime employment and prevent social turmoil caused by layoffs or corporate bankruptcies.

He also said companies were not putting their money into circulation. "Japan has as many as 210,000 'zombie companies' that should go bankrupt but don't," Park said. "Because rising unemployment would cause social unrest, the government lends them money at low interest rates and keeps them afloat." Regarding companies with strong performance, he added, "They keep all their money inside because they don't know when a crisis might hit, and their internal reserves are setting new records day after day."

Park said, "Japan treated individuals' intense efforts to innovate as something wrong and chose stability instead." He predicted, "Because it tried to grow without making sacrifices, it could fall out of the world's top 10 after 2030." He added, "South Korea will also reach a point of decline someday, so it should learn from Japan's decline and prepare for the future."

"India and the UK to Overtake Japan Next Year"... Out of the Top Five for the First Time in 67 Years

According to the economic outlook released by the IMF this month, Japan, currently the world's fourth-largest economy, has a nominal GDP of $4.3419 trillion (approximately 5.795 quadrillion won) this year. The United Kingdom and India follow in fifth and sixth place, respectively. But next year, the order is expected to be reversed. The IMF forecasts next year's GDP at $4.5211 trillion for India (approximately 6.035 quadrillion won), $4.4889 trillion for the United Kingdom (approximately 5.992 quadrillion won), and $4.4676 trillion for Japan (approximately 5.963 quadrillion won).

Growth rates and exchange rates are what determine the rankings in the IMF's forecast. India continues to post real growth of 7% to 8% a year, while the United Kingdom is expected to maintain faster growth than major European economies, fueled by increased investment in artificial intelligence (AI). Japan, by contrast, has a low growth rate, and the yen continues to weaken. GDP rankings compare the size of each country's economy after converting its GDP, calculated in its own currency, into dollars. This means that Japan's economy shrinks in two ways when growth is slow and the yen also loses value. The IMF noted, "Countries that rely heavily on resource imports and have persistently weak currencies will need to manage inflation and exchange-rate volatility effectively to maintain the size of their economies."

Fueled by rapid growth after World War II, Japan became the world's second-largest economy in 1968. It subsequently ceded that position to China in 2010 and to Germany in 2023. It will be the first time since 1960, a span of 67 years, that Japan has fallen out of the world's top five.

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