Japan’s Economic Challenges Exposed: GDP Takes a Hit, Falling Behind South Korea for the First Time in Decades

The latest reports highlight Japan’s economic standing is facing a sharp decline.

According to the Japanese Cabinet Office’s annual national economic accounts, Japan’s per capita nominal GDP for 2023 was $33,849. This places the country 22nd among OECD member nations, trailing behind South Korea, ranked 21st with a per capita GDP of $35,563.

The Nihon Keizai Shimbun (Nikkei) reported these findings on Tuesday. They mark a significant turning point in the region’s economic landscape.

Revised GDP figures show that South Korea outperformed Japan in 2022 and 2023. This marks the first time since 1980 that South Korea has overtaken Japan in per capita nominal GDP.

Additionally, Japan lags behind Italy’s per capita GDP of $39,003, placing it last among G7 nations. Japan’s total nominal GDP in 2023 stood at $4.2137 trillion, accounting for 4% of global GDP.

For the first time, Germany surpassed Japan, with a total nominal GDP of $4.5257 trillion. The United States and China continued to dominate global rankings, contributing 25.9% and 16.8% of global GDP, respectively.

Currency exchange rates have significantly contributed to Japan’s economic decline. The 2023 calculations were based on an exchange rate of 140.5 yen per dollar. Further decreases are anticipated, with the average exchange rate projected at 151.3 yen per dollar from January to November 2024.

The Japan Economic Research Center predicts Japan’s per capita nominal GDP will fall behind Taiwan’s by 2024.

Labor productivity also remains a critical issue. In 2023, Japan’s hourly labor productivity was $56.80, ranking it 29th among OECD members. The Nikkei Center has emphasized the need for digital transformation and workforce reskilling to address this lag.

Moreover, demographics further complicate Japan’s economic recovery. Over half of Japanese households now consist of members aged 65 or older, creating significant constraints on growth. Experts argue that corporate efforts to raise wages alone may not be enough to revitalize the economy.