South Korea Overtakes Japan in Per Capita GDP for First Time, Signaling Shift in Economic Power
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South Korea has surpassed Japan in per capita gross domestic product for the first time ever, according to data released by Japan's Cabinet Office. The shift, reported by Nikkei Asia, marks a significant change in the economic landscape of East Asia and is attributed to Japan's weakening yen and aging population.
The data, released Monday, reveals that Japan's per capita GDP fell to $33,849 in 2023 from $34,112 in 2022. In contrast, South Korea's per capita GDP rose to $35,563 in 2023 from $34,822 in 2022. Notably, South Korea had not previously surpassed Japan in this metric since 1980.
Japan's decline is attributed primarily to the depreciation of its currency. The weaker yen significantly impacts Japan's GDP when measured in dollar terms, a key factor in international comparisons. The Cabinet Office used an exchange rate of 140.50 yen per dollar for its 2023 report, but with the dollar averaging 151.30 yen between January and November 2024, Japan's GDP figures are likely to be further suppressed.
Beyond currency fluctuations, Japan's aging population and declining labor productivity are contributing to its economic stagnation. The country ranked last among the Group of Seven advanced economies in per capita GDP for the second consecutive year in 2023, trailing even Italy.
Japan's nominal GDP reached $4.21 trillion in 2023, representing a 4% share of global GDP. The United States led with 25.9%, followed by China at 16.8% and Germany at 4.3%. Notably, Germany's nominal GDP surpassed Japan's in 2023, reaching $4.52 trillion.
Experts attribute Japan's waning economic competitiveness to a decline in workforce productivity, exacerbated by a rapidly aging population. More than half of Japanese households now include individuals aged 65 or older, posing significant challenges to boosting overall economic output.
"The bubble economy generation will all turn 60 years old or older over the next five years," says Hideo Kumano, chief economist at Dai-ichi Life Research Institute, to Nikkei Asia. "Unless we change the current structural designs that restrict the labor supply of seniors, we won’t realize a fundamental solution toward increasing household income."
Beyond labor force issues, Japan faces increasing competition from other Asian economies. Taiwan, for instance, is projected to surpass Japan in nominal GDP per capita this year, underscoring the dynamic shift in regional economic power.