Germany will have to give up its newly acquired title as the world’s third largest economy this year. The OECD, the club of industrialized countries, predicts that Japan will succeed. The reason for this is exchange rate fluctuations.
“The normalization of monetary policy will lead to higher interest rates and a slightly stronger yen again this year,” said Robert Grundke of the OECD (Organization for Economic Co-operation and Development).
Just last year, Japan lost its place as the world’s third largest economy, behind the United States and China, even though the country’s economy grew by 1.9 percent. The yen currency was severely devalued. “The strong interest rate differential has led to a large capital outflow from Japan and to a sharp devaluation of the currency of around 50 percent (…),” Grundke said.
Development only temporary
However, Japan’s economy is growing slower than Germany’s. Contributing factors include a rapidly aging population, a lack of investment and the retention of old industries. “In the coming years, this will mean that Germany will take its place before Japan.” In about a decade, third place will go to India, Grundke said. The country has a growing labor force, many investments and rising productivity.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
