Japan has been dethroned as the third largest economy in the world.

Economic reports are coming in for 2023, and Japan is now the fourth biggest economy in the world, falling behind Germany. Japan’s economy contracted in the fourth quarter of 2023, which started a period of economic recession for the country.

Japan’s hold on the #2 position for world economies slipped back in 2010, when Japan gave the spot away to China. Since then, the country has been experiencing economic decline.

Recent government report stated that Japan’s economy is decreasing about 0.4% annually, calculating the average based new information for the period from October to December of 2023. However, Japan’s economy grew 1.9% in 2023. The economy shrank in the July to September third quarter, contracting almost 3%. When an economy contracts for two consecutive periods, it is considered to be in technical recession, even if a real recession is not being felt.

Japan’s total gross domestic product for 2023 was $4.2 trillion, and Germany managed to beat it with a $4.5 trillion GDP.

What’s Causing Japan’s Economic Decline?

The primary factor contributing to Japan’s weaker economy is a weakening Japanese yen. Gross domestic product is determined in dollar terms, and the yen has been diminishing against the US dollar.

Other factors at play include a decreasing population, an aging workforce, and lagging sales in the automotive and robotics industries. Japan is no longer the leader it once was in the automotive industry, as its gas-powered cars are not selling at the rate of electric cars from foreign manufacturers.

Japan’s economic bubble burst in the 1990s after decades of economic boom in the wake of World War 2’s economic collapse. Last year was a rough one for the Japanese economy, and the country made a poor showing as one of the worst performing economies in the world.