Japan's GDP may be surpassed by two other countries next year.
According to media reports from the Japanese 'Nihon Keizai Shimbun' and TBS TV, the latest 'World Economic Outlook Report' released by the International Monetary Fund predicts that Japan's nominal gross domestic product (GDP) will be surpassed by India and the United Kingdom in 2027. As a result, Japan's global ranking will drop from its current fourth place to sixth place.
It is noteworthy that in April this year, the IMF also predicted that the UK would not surpass Japan until 2029. Just half a year later, this timeline was moved up by two years.
According to the latest forecast released by the IMF in October, Japan's nominal GDP will be approximately $4.3419 trillion in 2026, ranking fourth in the world, after the United States, China, and Germany. The UK and India will rank fifth and sixth, with GDP amounts of approximately $4.2684 trillion and $4.0602 trillion, respectively.
But by 2027, this ranking may change.
The IMF predicts that India's nominal GDP will reach $4.5211 trillion by then, ranking fourth in the world; the UK will be fifth with $4.4889 trillion; Japan will be sixth, with $4.4676 trillion.
This means that Japan will still maintain economic growth in overall volume, but the rate of growth may not be enough to maintain its current ranking.
On the 14th, Japan's TBS television reported that Japan's economic growth has been sluggish. India and the UK are expected to achieve higher growth rates. Combined with the long-term weakness of the Japanese yen, Japan's GDP measured in US dollars has been compressed, which is the main reason for its declining ranking.
"The Japan Economic News examines changes in the Japanese economy over a longer time frame."
In 1968, Japan surpassed West Germany to become the world's second-largest economy, maintaining this position for several decades. In 2010, Japan was overtaken by China and dropped to third place in the world. In 2023, Japan was overtaken by Germany, falling to fourth place.
If the IMF’s prediction comes true, 2027 will be the first year in Japan’s history since 1968 when it drops to sixth place globally.
In the eyes of Japanese media, the problem Japan faces is not just fluctuations in exchange rates.
According to data cited by Nikkei, in the past 25 years up to 2025, Japan's real GDP had an average annual growth rate of only 0.7%. This rate is significantly lower than that of emerging economies like India and China, as well as developed countries such as the United States and the United Kingdom.
The latest predictions by the IMF also show that Japan’s actual economic growth rate in 2026 is expected to be only 0.7%, lower than the 1.3% in the UK, and far below India’s growth rate of about 7%.
Population aging, a decrease in the labor force, weak domestic investment, and a lack of growth in consumer spending have long constrained Japan's economic development.
Meanwhile, the depreciation of the yen further amplified the changes in Japan's economic total ranking.
Since international GDP rankings are usually calculated in US dollars, if a country's currency depreciates against the US dollar, even if the economic scale calculated in that country's local currency increases, the total amount in US dollars may decrease. Therefore, changes in nominal GDP rankings do not fully reflect changes in a country's actual output or the living standards of its residents.
This is particularly evident in the comparison between Japan and the UK.
According to IMF predictions, the UK's GDP in 2027 will be only about $21.3 billion higher than Japan's, a difference of less than 0.5% of Japan's GDP. If there are slight changes in future exchange rates or economic growth expectations, the final ranking may change.
However, sluggish Japanese economic growth has been a long-standing issue.
Japan's Nissay Basic Research Institute's Economic Survey Department Head, Tarō Saito, pointed out that to promote economic growth, measures must be taken to increase disposable income for residents, thereby stimulating consumption.
Currently, Japan is also facing additional pressure due to rising energy costs. The IMF predicts that increased energy costs will dampen Japan's economic activity and put the Bank of Japan in a persistent dilemma between controlling inflation and supporting economic growth.
From second to third, fourth in the world, and possibly down to sixth, the changes in Japan's economic aggregate ranking reflect the ongoing adjustment of the global economic landscape.
For Japan, perhaps more important than the ranking itself is how to get rid of long-term low growth, increase productivity, and create a stronger economic growth support for residents' income and domestic consumption.
