It made headlines when Japan fell behind Germany's nominal GDP as measured in dollars. Does it mean anything more than when your odometer hits 100,000 or when you take pride in your team winning the Super Bowl? For the most part, no. But a little bit yes.

For the most part, the reversal of rank in GDP is simply an artifact of the 40% fall of the yen vis-à-vis the Euro from 2012-2024. When the yen was pushed way down in 2012-14 as part of Abenomics, Japan's nominal GDP--when converted to dollars--also plunged, by 20%: from $6.2 trillion to $4.9 trillion. Of course, no such Depression-level plunge occurred in real GDP. The ratio between the euro and yen has been on a roller coaster. When the yen weakens, Japan's GDP falls relative to Germany's--but only when measured in dollars. When the yen recovers, as in 2014-2016, Japan's nominal GDP in dollars goes back up.

There are, however, measures that eliminate such distortions and they show how Japan's catchup to real German per capita GDP has reversed and will continue doing so.

For details, see https://richardkatz.substack.com/p/germany-surpasses-japan-at-3-nominal

Richard Katz

The Contest for Japan's Economic Future: Entrepreneurs vs. Corporate Giants