Recently in an announcement, it’s been revealed that by 2025, Bharat is set to surpass Japan in nominal gross domestic product (GDP) in dollar terms. This news has sent shockwaves through Tokyo, which has long held the position as the world’s second-largest economy until 2010.
Now, Japan finds itself on the brink of slipping to fifth place, with Bharat’s economy projected to reach $4.34 trillion, surpassing Japan’s $4.31 trillion.
The International Monetary Fund (IMF) released estimates indicating Bharat’s accelerated progress, attributing it in part to the weakness of the Japanese yen. Japan’s decline in economic standings follows its slip behind Germany in 2023.
This development echoes the shift in 2010 when China overtook Japan as the world’s second-largest economy.
Experts highlight Japan’s concern over this development, acknowledging the challenges faced by the country. Initiatives like “Abenomics” were introduced in 2012 by Prime Minister Shinzo Abe to address economic stagnation. While some aspects of this policy were successful, structural reforms aimed at driving growth fell short due to resistance to change and an aging population.
External factors such as the COVID-19 pandemic and geopolitical tensions, like Russia’s war in Ukraine, have compounded Japan’s economic challenges.
Reports from organizations like the OECD reflect a downward revision in Japan’s growth projections, indicating a more acute problem than initially anticipated.
Analysts point out the inherent differences between developed and emerging markets, noting that slower growth is expected in developed economies like Japan and the US compared to emerging markets like India and China. They emphasize the need for Japan to focus on productivity growth, given demographic trends and infrastructure disparities.
A major challenge for Japan is the weakness of the yen, which has prompted government interventions to bolster the currency. Market experts suggest that traditional interventions have proven ineffective, advocating for tighter monetary policies and increased productivity to address this issue.
Despite challenges, there’s cautious optimism regarding Japan’s economic future. Initiatives aimed at corporate governance reform, labor participation, and human capital development are seen as positive steps.
Experts anticipate that these efforts will contribute to sustained progress and help Japan overcome deflationary pressures.
As Bharat’s economy continues to ascend, Japan faces a critical juncture in its economic trajectory. While challenges persist, there are signs of progress and potential for Japan to navigate its way towards sustained growth and competitiveness in the global economy.
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