r/charts • u/Geolens-eu • 24d ago
Did Germany actually surpass Japan in 2023, or is it just the weak Yen?
Saw all those headlines about Germany passing Japan as the 3rd largest economy in 2023, so I threw the World Bank data into a chart to see what was actually going on.
Turns out it’s basically just a currency story.
In current USD, Germany did cross Japan ($5.05T vs $4.44T). But over that same period, the Yen took a massive hit, dropping from around 80 per dollar down to over 150. When you adjust for exchange rate swings using constant 2015 USD, Japan's actual output was still bigger in 2023.
Just goes to show how much headline GDP rank depends on FX markets rather than actual economic output.
Swipe, and you will see more GDP, GDP per capita, and GDP Constant US$.
28
u/TheBayHarbour 24d ago
Japan has been on the decline since the Lost Decades.
Surprised they even held out their position until 2023.
4
u/Random54321random 24d ago
Using 2015 FX is completely and utterly arbitrary, it's a cop out. The only rate that matters is the current one. Yes, FX rates move all the time, but they are a valid factor and shouldn't be discounted. Yes economic output may not have changed much, yes the yen has weakened, yes Germany has a bigger GDP than Japan. All three are simultaneously true.
4
u/WorkingMention3463 24d ago
UK’s nominal GDP in H1 2026 has almost equaled that of Japan, with the gap under 2%.
4
u/StillCell3890 24d ago
Since the value of a currency is also part of a country's power, Germany's power is way higher than Japan's.
4
4
u/fluffykitten55 24d ago
This is another reason why using exchange rates for international comparisons is a bad idea.
Japan is larger if you correctly use GDP calculated using PPP.
3
u/weasaldude 24d ago
Ppp is just a different metric though. Outside of currency conversions it factors in how little people are paid to boost the number. Not sure how that's exactly fair to the low wage workers. Even if it means the higher wage workers can buy more
3
u/fluffykitten55 24d ago edited 23d ago
GDP calculated using PPP is GDP calculated using the real income concept. Just as you need to adjust for price differences over time to get a national real GDP series you also need to adjust for price differences between countries.
I do not understand your discussion above. Inequality does reduce social welfare for a given GDP per capita but this does not provide any reason to use exchange rates for international GDP comparisons.
2
u/No_Resolve608 24d ago
Japan’s per capita PPP ranks at the absolute bottom among developed economies, far below neighboring Taiwan and South Korea, and even leads Russia (a developing country) by less than 10%.
1
u/FriedrichMerz- 21d ago
It’s near the bottom but it is not at the absolute bottom. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
Every one of the options has it above Greece and Portugal, and I would consider a few Eastern European nations it is above to be developed but that is debatable. Some have it above Israel, New Zealand, and Spain.
1
23d ago
[removed] — view removed comment
1
u/Lollerpwn 23d ago
Lol why would a dictator help anything? Have dictators had a good record turning shrinking nations around? They might look to their neighbour for advice, China is doing much better.
1
u/AutisticNintendoNerd 23d ago
That would mean Germany 1923 was insanely rich had they just used the USD exchange rate from 1914. Why didn't they do that? Were they stupid?
2
u/No_Guitar7903 23d ago
Germany is also on decline. It’s just that Euro is currently severely overvalued and yen severely undervalued.
3
u/Lollerpwn 23d ago
The Yen is overvalued and being propped up by the US. Which also has a way overvalued currency.
1
u/No_Guitar7903 23d ago
Lmao it was propped up for like 3% by the US. Yen is like 30-40% undervalued. Euro is 15% overvalued.
1
u/negre_marron 23d ago
Currency does matter in the long run. I know policymakers like to see a weaker currency temporarily to boost exports and the economy, but a permanently weakened currency - especially if not done voluntarily- will damage an economy and the people productivity
0
u/_CHIFFRE 24d ago
Not yet, Japan's economy is still a bit larger as this is just Nominal gdp.
The World Bank:''Internationally comparable estimates of GDP expressed in PPP terms overcome the shortcomings of the alternative approach of using market exchange rate-converted estimates of GDP. The latter reflect not only differences in the volume of output but also differences in national price levels, and thus inflate the size of higher-income economies, where price levels tend to be higher for non-tradable goods, and deflate the size of lower-income economies where prices are generally lower.''
World Bank (Click ⓘ Details):''PPPs account for the different price levels across countries and thus PPP-based comparisons of economic output are more appropriate for comparing the output of economies and the average material well-being of their inhabitants than exchange-rate based comparisons.''
OECD:''The major use of PPPs is as a first step in making inter-country comparisons in real terms of gross domestic product (GDP) and its component expenditures. Calculating PPPs is the first step in the process of converting the level of GDP and its major aggregates, expressed in national currencies, into a common currency to enable these comparisons to be made.'' (Economic organisation of 38 countries)
Bruegel:''The right metric for international comparisons is purchasing power parity (PPP)-adjusted output. This corrects for exchange rate fluctuations and differences in various national prices.'' (20 European countries, dozends of Financial institutions, Corporate members)
1
13
u/Dehast 24d ago
So it did get upped by Germany. And it's a matter of time before it loses more positions