Germany displaces Japan from third place as the largest economy

Germany is the third largest economy in the world this year, ahead of Japan. This emerges from new estimates from the International Monetary Fund. Thus, Japan disappears from the top three after decades. The United States remains the largest economy in the world, followed by China.

According to the International Monetary Fund, Japan’s gross domestic product, a measure of the size of the economy, will reach $4.2 trillion this year. This is almost 4,000 billion euros and slightly less than last year. But the German economy will reach $4.4 trillion (more than 4,100 billion euros). Therefore, the average GDP per capita in Germany is estimated at about 50 thousand euros, compared to about 32 thousand euros in Japan.

Germany, the Netherlands’ most important trading partner, outperforms Japan mainly because inflation in Europe’s largest economy is much higher than in Japan. The depreciation of the Japanese yen against the US dollar and the euro also plays an important role.

Due to Japan’s relatively low inflation compared to other major economies, the Bank of Japan has not raised interest rates and the country’s interest rates remain at a very low level. Central banks in the United States and Europe have raised interest rates significantly in the fight against inflation. These high interest rates put pressure on the value of the Japanese currency.