The country shifted from being the second-largest economy behind the U.S. to the third-largest in 2010 due to the growth of China's economy.
Japan's economy unexpectedly entered a recession for the second consecutive quarter, driven by weak domestic demand. This development has led some analysts to delay their predictions on when Japan's negative interest rate policy might come to an end.
In 2010, Japan dropped from being the world's second-largest economy, trailing only the U.S., to the third-largest, as China's economy continued to expand.
The International Monetary Fund had predicted Japan's descent to fourth place.
When comparing economies among nations, nominal GDP is used, which doesn't fully capture certain national conditions and is denominated in dollars. Japan's nominal GDP reached $4.2 trillion last year, equivalent to about 591 trillion yen. Germany's, announced last month, stood at $4.4 trillion or $4.5 trillion, depending on the currency conversion.
According to data from the Cabinet Office, Japan's economy contracted at an annual rate of 0.4% in the latest October-December quarter, and decreased by 0.1% from the previous quarter in terms of real GDP. However, for the entire year, real GDP increased by 1.9% compared to the previous year.
Real gross domestic product measures the value of a nation's goods and services. The annual rate indicates what the situation would be if the quarterly rate persisted for a year.
Both Japan and Germany have cultivated their economies by fostering robust small and medium-sized businesses with high productivity. Unlike Japan, Germany has demonstrated a sturdy economic foundation supported by a strong euro and controlled inflation. The devaluation of the yen also acts as a detriment to Japan.
The most recent data reflects the weakening state of Japan and is likely to diminish its global presence, according to Tetsuji Okazaki, an economics professor at the University of Tokyo.
"A few years ago, Japan boasted a formidable automotive sector, for instance. However, with the rise of electric vehicles, even this advantage is being challenged," he remarked.
Okazaki also noted that the gap between developed nations and emerging economies is narrowing, with India poised to surpass Japan in nominal GDP within a few years.
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