WorldMoney & Business

Japanese Angst As India Set To Become 4th Largest Economy

Once an economic powerhouse that was the envy of much of the world, there is deep concern in Tokyo that the economies of China and Germany have already surpassed Japan’s — and that India’s will do so next year.

The announcement that in 2025 India will overtake Japan in nominal gross domestic product in dollar terms has shocked Tokyo, which had until 2010 been the undisputed second-largest economy in the world but is now on the brink of slipping to fifth place.

In estimates released in late April, the International Monetary Fund (IMF) indicated that India’s nominal GDP will reach $4.34 trillion (€4.03 trillion) in 2025, surpassing Japan’s $4.31 trillion. The timing of India’s surge into fourth place in the world comes one year earlier than the IMF’s last estimate, due in large part to the weakness of the Japanese yen.

Japan’s decline in the global economic standings follows the government’s confirmation that the nation slipped behind Germany in 2023. The shock at India likely surpassing Japan next year is comparable to 2010, when a buoyant China replaced Japan as the world’s second-largest economy.

“For Japan, this is a very big concern — but few people are talking about it openly because it is embarrassing and very difficult to solve,” said Martin Schulz, chief policy economist for Fujitsu’s Global Market Intelligence Unit.

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