Arab News Japan

TOKYO: Japan’s global ranking in gross domestic product per capita will drop from 29th (2024) to 45th in 2075, according to a report by Nikkei Asia.

Nikkei quoted a forecast on 83 economies by the Japan Center for Economic Research, which predicted that Japan’s real GDP will reach $4.4 trillion in 2075, compared with $3.5 trillion in 2024, dropping it from fourth place to 11th worldwide. Annual growth is expected to slow to an average of 0.3% from 2071 to 2075.

The United States and China are projected to remain in first and second place in terms of real GDP, with AI boosting productivity, particularly in information services, finance, and insurance. Japan, which does not have as deep a base in those sectors, is expected to benefit less from AI.

JCER estimates fertility rates could affect the economies of major countries, predicting China’s total fertility rate of 0.8 in 2075 will hold its economy back.

The report expects growth in Japan to be hampered by a population decline that will further shrink its labor pool. The country’s total fertility rate is projected at 1.1 from the mid-2040s and 2075, below the record low of 1.2 in 2023. It is expected to bring in a net 230,000 to 240,000 immigrants a year – the fifth highest in the world – but its population is likely to fall to about 97 million in 2075, with 16 million foreign-born residents.

Japan’s GDP per capita is expected to grow about 60 percent from 2024 to $45,800 in 2075. This would remain the lowest among the Group of Seven advanced economies and rank below such countries as the Czech Republic, Slovenia, Brunei, Kazakhstan, and Russia. South Korea, by comparison, is expected to rise to 21st place at about $79,200. Luxembourg, Ireland, and Switzerland are expected to remain the top three in terms of GDP from 2024 to 2075.

The report underscores the urgent need for Japan to reform its labor practices, including the mandatory retirement age, compensation disparities between regular and part-time or temporary workers, and increased public spending on education. These reforms are crucial to enhancing productivity and increasing labor force participation, and their implementation cannot be delayed.

Global growth is expected to average 3.3 percent from 2021 to 2030, thanks partly to gains from generative AI, but slow to 1.3 percent from 2071 to 2075 as populations decline in major economies.

The report from JCER introduces a note of uncertainty, suggesting that China could potentially overtake the US in GDP if the policies of US President Donald Trump have a prolonged impact. This possibility adds a layer of unpredictability to the future economic landscape.

Emerging markets are on the brink of a significant economic transformation. India is poised to rise to third place in the global GDP ranking, and the 10 current members of the BRICS group – including Brazil, Russia, India, and China – are projected to collectively surpass the US in total GDP by 40 percent in 2075.