Germany overtakes Japan as the third largest economy thanks to the weakness of the yen

Germany overtakes Japan as the third largest economy thanks to the weakness of the yen

According to the Bundesbank's latest monthly report, the German economy contracted in the third quarter. Economists at Deutsche Bank Research also expect a decline of around 0.3 percent for the same quarter. Despite this recession, Germany is expected to overtake Japan as the third-largest economy, largely due to the weak yen. The latest forecasts from the International Monetary Fund show higher growth potential for Germany than for Japan. The yen's weakness is largely due to differences in monetary policy. The US Federal Reserve and the European Central Bank have raised interest rates, while the Bank of Japan has remained in stimulus mode. This has kept pressure on the yen. The Bank of Japan may not change its control over bond yields until next year. The IMF figures also show more stable long-term growth in Germany compared to Japan. The German economy is estimated at $4.43 trillion this year, compared to $4.23 trillion for Japan. The gross domestic product per person in Germany averages $52,824, compared to $33,950 in Japan. This catch-up potential for Germany could worry monetary policy makers in Japan as they reconsider their current economic package. The measures are intended to promote growth and alleviate the rising cost of living in Japan. The euro-yen exchange rate is currently moving towards 160 yen, which could further support Germany's rise as the third largest economy.

Source: According to a report from finanzmarktwelt.de.