TOKYO: India will overtake Japan in nominal gross domestic product in dollar terms in 2025, according to the International Monetary Fund’s estimates released this month.

Japan’s nominal GDP in 2025 is estimated at 4,310.3 billion dollars, while India’s is put at 4,339.8 billion dollars.

The timing of India’s GDP surpassing Japan’s is a year earlier than the IMF projected last October, reflecting the yen’s further depreciation.

The Japanese economy would fall to the fifth largest in the world. Only in February, GDP data released by the Cabinet Office showed that Japan was overtaken by Germany in 2023, falling to fourth place in the world.

In the Cabinet Office data, the dollar’s average exchange rate in 2023 was 140.48 yen. But in overseas trading on Friday, the dollar rose above 158 yen for the first time in about 34 years.

Behind the rise of India is not only the weaker yen, but also its rapid economic growth. In 2023, India’s economy grew 7.8 percent, much faster than Japan’s 1.9 percent.

India’s economic growth is being driven by huge domestic demand, as its population is believed to have surpassed China’s in 2023 and become the largest in the world.

“India is attracting funds from advanced economies at a time when investment in China is being held back,” said SAITO Makoto of NLI Research Institute.

Hideo Kumano of Dai-ichi Life Research Institute Inc. pointed out that the Japanese government and the Bank of Japan’s policies to weaken the yen should be blamed for the country’s low growth rate.

“Economic growth that depends on the yen’s depreciation has its limits,” Kumano said, pointing to the need to boost productivity through energy-saving efforts and by encouraging investment.

JIJI Press