Germany to Pass Japan as Third-Largest Economy, Helped by Weak Yen

https://www.bloomberg.com/news/articles/2023-10-24/germany-to-pass-japan-as-3rd-largest-economy-helped-by-weak-yen

by akyuu • 3 years ago

118 250 3 years ago

akyuu• 3 years ago

alephnerd2• 3 years ago

It's based on conversion of GDP metrics to USD. The JPY has been depreciating less due to Japan and more due to the rapid appreciation of USD post-COVID and post-Interest Rate Hike. It's a larger example of why GDP/GDP PPP tend to not be used alone when analyzing economies.

dustypotato• 3 years ago

Doesn't that mean that the USD/EUR is deprecating at the same rate thereby balancing this effect ?

alephnerd2• 3 years ago

Good question. The Euro is depreciating as well, but not at the same rate as JPY because Japan has some of the lowest interest rates in the OECD as they didn't have an inflation problem unlike the Eurozone and US. Generally speaking, among major currencies, interest rates are highest in USD, then Euro, and the Yen has largely remained consistent since the 90s

fomine3• 3 years ago

Japan Yen is the only currency that still continue negative interest and QE. https://tradingeconomics.com/country-list/interest-rate

dependsontheq• 3 years ago

Germany is wildly underestimated in the current moment. The immigration wave has changed the demographics, Germany is not going to age quickly and it is growing in population.

Georgelemental• 3 years ago

How productive are the new arrivals though?

constantly• 3 years ago

I saw an article recently that claimed Germany was going to surpass Japan as the third largest economy, aided partially by new arrivals. So I infer they’re pretty productive! Will try to find you a link.

dj_mc_merlin9• 3 years ago

Well, 90% of the people in my office are immigrants. Pretty productive. Obviously however software engineering has been a very immigrant-heavy industry in Europe for a long time. There's just not enough German software engineers to work the huge capital that it has.

When looking at more common jobs, it's quite hard to find a German when you pass by any construction site. In fact, I can speak to a good amount of the workers in my native language.

luckystarr5• 3 years ago

Its varied. I think there was no study that checks that for the whole of Germany, but in my town, most (>90%) of the Syrian refugees from a few years back are now settled down, have a job and and pay social security. A few have high paying jobs (construction, specialized metal-working, etc.), but many of them are in the medium to low income sector. Interestingly, they view food related jobs as high status jobs, whereas German people do not. So many of them are employed in restaurants, etc.

Update: there are of course also other arrivals, but the Syrians make the bulk of them.

Eumenes3• 3 years ago

Not very - https://www.iab-forum.de/en/what-do-we-know-about-the-employ...

Less than 50% are employed 5 years after arrival, in a country with 5.7% unemployment.

I imagine adults who don't speak the language, require financial assistance, etc, will be a net drain from a tax perspective on a society, esp. when you factor in the high CoL. Its hard enough for the average naturalized citizen to be a net positive from a tax perspective, let alone someone from an entirely different world. An inconvenient/unpopular, but obvious truth.

selfmodruntime3• 3 years ago

Contrary to the parent comment and what you will read here: Not very. This won't change for a long time. Syrians from 2015 earn a lot less than the median and more than 70% rely on welfare that pays out more than they earn [1]. Up to 90% of Ukranians rely on welfare [2], costing the German Government half a billion dollars in in welfare checks alone. Marrocans are three times as likely to rely on welfare / to be jobless than Germans [3]. There are three times as many jobless people with a history of migration than Germans [4].

This is not a political agenda. These are just facts.

[1] https://www.faz.net/aktuell/wirtschaft/arbeitsmarkt-fuer-flu...

[2] https://www.zeit.de/politik/deutschland/2023-10/ukraine-gefl...

[3] https://www.welt.de/wirtschaft/article168661565/Tuerkischsta....

[4] https://mediendienst-integration.de/integration/arbeitsmarkt...

jackcosgrove• 3 years ago

The main critiques of Germany I hear are not demographic but rather have to do with problems in industrial and energy policy. Namely the failure to anticipate the shift to electric vehicles and the over-reliance on natural gas for energy.

liotier5• 3 years ago

Germany's energy policy failed badly, but consider Germany as part of the European Union with nuclear-powered France as its neighbour. Ensemble wir schaffen das !

mrits5• 3 years ago

The shift to EVs? When did that happen?

mrangle2• 3 years ago

Industry's failure to anticipate political enforcement of electric vehicle adoption? Over-relaince on Russia for energy (to decode the natural gas comment). Both political complaints. Perhaps German industry just predicts their long term future differently.

mft_• 3 years ago

While I'm still trying to get my head around things in Germany, I'd argue that those are symptoms of deeper cultural issues related to deeply-embedded conversatism and over-respect for hierarchy (e.g. status, age, seniority) in leadership, risk-taking, and decision-making throughout the private and public sectors.

geff822• 3 years ago

Maybe Volkswagen et al. didn't innovate early enough in terms of electric cars, but it gets more interesting every day (to the point that I would by German instead of a Tesla).

But where the country is spectacular: in charging infrastructure. It has one of or even the densest high-performance-charger network in the world. 350kw chargers: world leading. Sure, the network is not finished yet. But having to actually have an electric car, Germany is one of the best places to be.

Few people noticed: Germany has also the leading hydrogen-fuelstation network outside Japan and South Korea.

rsynnott3• 3 years ago

Namely the failure to anticipate the shift to electric vehicles

I'm a _little_ confused by this narrative. VW Group is the largest seller of electric vehicles to the EU market. BMW is also pretty big. I mean, could German manufacturers be _more_ dominant? Perhaps, but it's certainly not a Toyota type case.

(I actually wonder how much of this is driven purely by the extreme... invisibleness of the eGolf and eUp; it was very difficult to tell that they weren't Golfs/Ups. Some people may think that the i3/4/5 are VW's first electric cars.)

ekianjo• 3 years ago

Germany is not going to age quickly and it is growing in population.

Raw numbers don't matter. Culture will be deeply impacted. Also, the energy policy of Germany is catastrophic and will guarantee its doom

hef1989817• 3 years ago

All the right wing fear uttering in two short sentences. Well done!

huytersd2• 3 years ago

Not if enough of the immigrants adopt the important parts of German culture. It happens easily in the US I don’t see why it can’t in Germany.

wolverine8765• 3 years ago

Stagnant cultures rot. Think how much culture has changed, even in the last 10 years.

Plenty of research shows that if you put people in safe places with opportunity, they of course respond very well. They also embrace very attractive concepts like freedom, human rights, fairness, etc.

throwawy7• 3 years ago

The whole Europe should welcome more immigrants to have strong economy and manufacturing base like China. Europe has space for another 500 million population.

mrtksn10• 3 years ago

Having lived in UK and Germany for some time, although I'm a big fan of the British culture, I keep maintaining that Germany is much much better country overall simply because it's not centralised as UK is centralised in London.

Germany is prosperous, maybe there are not as many Unicorns as in USA or even UK, the country works like a clockwork and everyone is very active in very wide range of stuff.

All those charts showing how Europe is behind because top 100 largest companies are mostly American tech giants, some petrol companies and some construction and bank stuff from China? Those are so so misleading into making people believe that Germany or mainland Europe is a wasteland that missed out on technology.

Especially Germany, they have very well educated and healthy population and even if they don't make the most trendy consumer products right now, they still have wast infrastructure and people who can produce things.

Of course not everything is rosy, but Germany's and mainland Europe's core problems all come down to cheap energy availability and that's solvable. It's much easier to solve than stuff like widespread social problems like decline due to drug use or political instability.

They tend to rely on paperwork a bit too much maybe, they don't use credit cards that much etc. all these stereotypes are true but technology is not limited to computers, other stuff is also important and they are still pretty good in these things.

piva00• 3 years ago

Germany is a powerhouse of medium-sized companies supplying precision engineering to a bunch of other industries. Those companies are mostly invisible to the consumer market but provide the machines which make machines, the German M&E (machinery and equipment) sector is massive, just not as flashy as tech unicorns creating yet-another ad-filled consumer product...

Wytwwww4• 3 years ago

the country works like a clockwork

Except trains and government bureaucracy and a bunch of other things.

torginus2• 3 years ago

I think that's the chief difference between countries that do well with immigration and the ones that don't - I have some French friends, who have basically fled the country because Paris has become unlivable - too expensive, too little space, and if someone with a good education and income has found it a struggle to get a decent place and live a good life, how is life for the rest of society?

PurpleRamen4• 3 years ago

I keep maintaining that Germany is much much better country overall simply because it's not centralised as UK is centralised in London.

That's interesting. In Germany the decentralization is considered a main reason for the many problems on modernization in bureaucracy and other public areas.

Those are so so misleading into making people believe that Germany or mainland Europe is a wasteland that missed out on technology.

I think the reason is more that Germany was an early adopter of many technologies, but was then trapped on old infrastructure and workflows, while some others simply failed for various reasons. So it's more an upgrade-problem, then "installation"-problem.

Europe's core problems all come down to cheap energy availability and that's solvable. It's much easier to solve than stuff like widespread social problems like decline due to drug use or political instability.

In theory yes, in reality it goes hand in hand. Germany for example is cursed by people who poison the progress since a long time. And the harm is showing since a while now. Ironically, it usually only gets better when something catastrophically happened, like Fukushima, or the War with Russia.

TMWNN• 3 years ago

No one believes the "doctors and engineers" line anymore. That mantra began dying after the 2015-2016 Cologne mass attacks on women, and every new incident since then has reduced its viability. The current pro-Hamas demonstrations throughout Europe are just the latest in a long line of such.

The Mittelstand is certainly not rushing to hire them.

f6v5• 3 years ago

Cologne attacks represent such a tiny fraction of immigrants. It’s like saying that 100% of Norwegian terrorist acts has been carried out by white men, and, therefore, Norwegian white men are all terrorists. Complety stupid.

svara• 3 years ago

Germany is lacking workers in all types of jobs, from least to most skilled. It's reliant on every type of immigration to fill those positions.

Sure, Germany doesn't particularly need criminal immigrants, but the criminality of immigrants is wildly blown out of proportion by racists, to put it bluntly.

This is corroborated by every statistic on crime. The country has been getting safer ever year for decades. It is also corroborated by looking a little bit into which violent crime specifically becomes highly publicized. There is a lot of attention on (violent) crimes of immigrants, while even gruesome murders of e.g. foreign exchange students by locals don't ever make it further than local news.

I'm German living in Germany, and the "problems" of immigration are a total pseudo-issue. It's 95% bullshit. I've never seen any such problem with my own eyes, yet it's one of the most publicized and discussed topics in this country. It's just strange, and I can't explain it any other way than by racism.

p0pularopinion• 3 years ago

No one believes the "doctors and engineers" line anymore.

I always found that line to be rather interesting. German is a very difficult language and hard to master. To go about everyday life as an immigrant, you'll either need to live in a big city or somehow magically master German. Also, large parts of Germany are increasingly known for not being exacyl welcoming for people of non-german descent.

The notion that all people want to come here and highly specialized immigrants will come rushing through the door is kind of arrogant and typically ignorant. Germany is reliant of net-immigration over the coming decades if the economy wants any hope of workforce availability.

That mantra began dying after the 2015-2016 Cologne mass attacks on women, and every new incident since then has reduced its viability. The current pro-Hamas demonstrations throughout Europe are just the latest in a long line of such.

negativity bias and media coverage are fascinating things. Not to take a way from the severity of the silvester attack, none of the issue you just mentioned is in any way representative of the average immigrant or refugee population. Even the "hamas demos" that received extreme media covereage were fairly small and peaceful on most occasions (also worth mentioning that demonstrating for piece in Gaza is not equal to demonstrating for Hamas, although there were instances).

The Mittelstand is certainly not rushing to hire them.

That generalized and somewhat racist rant is missing one key factor: they have to and they want to. Birthrates have been in continuous decline since the 70s and now boomers are also about to completely enter their pensions. The dependency ratio for the coming decade(s) is looking bleak. Also, as a result of declining births, you people entering the workforce is very much down. if you want to survive as company, you'll need workers. If you want workers, there is a high chance you'll also have to hire immigrants and refugees. Most companies want this, the remaining hurdle isn't racism or the unwillingness to hire them, it's as always the German bureaucracy

luckystarr5• 3 years ago

But they are also not exactly against hiring them, as they are not yet used to the fair level of wages they should demand. Cheap labor = good, right?

I know of cases where equally qualified (University degree, etc.) Syrians received 20% to 30% less than Germans.

rsynnott3• 3 years ago

I mean, currently it looks like it's more or less treading water on population, though it has gotten out of decline, which is positive.

huytersd2• 3 years ago

Always bet on Germany on the upswing. Make sure you cash out at the peak though.

Tade0• 3 years ago

Looking at how Germany's population after WW2 peaked three times already (in the early 70s, at the turn of the century, at the end of the pandemic), the environment there doesn't support having a growing population.

Moreover, the usual source countries have a below-replacement fertility rate, so the number of prospective immigrants is dwindling.

I don't see how this could be sustainable in the long run.

hobotime• 3 years ago

> The immigration wave has changed the demographics

Yes. And it will not be a German culture anymore as Germany is colonized.

givemeethekeys3• 3 years ago

Is it possible to instill the thing one learns about German culture into the immigrants, or at least, their children? I'd say yes. Are they up to the task? There aren't many countries that have the courage to indoctrinate their cultural values into their own children, let alone the immigrants.

zelphirkalt• 3 years ago

Germany has an ever growing pile of problems to solve though. Corruption, lobbyism, undemocratic measures, horrendous education sector, overworked employees in the most critical institutions and jobs (teachers, medical personell, doctors, firefighters, etc.), bad integration policies, failing infrastructure and politicians, who do all they can to make sure it keeps failing, and probably many more.

Gemany might not be the worst place. But it definitely has lost a lot of appeal due to all those issues.

KptMarchewa7• 3 years ago

Germany is not a lone island. Central Europe countries like Poland, Czechia, Romania or Hungary are very much integrated into German supply chain.

hef1989817• 3 years ago

German imports and expoets for July 2023:

> Destinations In July 2023, Germany exported mostly to United States (€13.6B), France (€9.23B), Netherlands (€8.64B), China (€8.27B), and Poland (€6.97B), and imported mostly from China (€12.8B), Netherlands (€8.55B), United States (€7.7B), Poland (€6.43B), and Italy (€6.26B)

Source: https://oec.world/en/profile/country/deu/

KptMarchewa7• 3 years ago

Netherlands are doing a great job at being a port of Europe.

orbital-decay• 3 years ago

Not everything can be measured by money and bulk volume; some things are measured by vitality and irreplacement. How do you measure CERN or ASML?

dj_mc_merlin9• 3 years ago

Romania is just barely behind Finland as the eastern most mainland EU country. Do you have any argument for calling it Central European?

flohofwoe2• 3 years ago

Considering that Europe's border in the East is the Ural Mountains range I'd say "Central Europe" is actually quite accurate?

(also - stating the obvious - but "Europe" and "EU" are entirely different things)

KptMarchewa7• 3 years ago

Europe is not defined by EU borders. The distance from Bucharest to Atlantic Ocean is smaller than to Ural mountains.

keiferski11• 3 years ago

These labels are more cultural than strictly geographic. Western Romania could indeed be considered as Central Europe, as “Central Europe” has generally meant “associated with the Austro-Hungarian Empire.” The border between the Russian and AH empires is a good line for dividing Eastern and Central Europe IMO.

e12e• 3 years ago

I think you would have to say something similar about Japan (even if Japan is a chain of Islands). Korea, Indonesia, the Philippines, China - I don't think the Japanese economy would be the same today without their neighbors?

KptMarchewa7• 3 years ago

Not exactly, as those economies compete as much as cooperate, while EU is a single market - at least in the "no tariffs and free flow of goods" sense.

permo-w• 3 years ago

would any country?

keiferski11• 3 years ago

Correct. A fair amount of larger companies, grocery store chains, etc. in Eastern EU states are owned by German companies.

KptMarchewa7• 3 years ago

Grocery store chains aren't very relevant in this discussion.

I'm talking about stuff like Mercedes-Benz engine factory in Jawor, seats from Groclin, Michelin and Bridgestone tyre factories, or the fact that Poland is world's second biggest battery manufacturer (ahead of US) - all of that is used in German car manufacturing supply chain.

anonyfox9• 3 years ago

Germany has its problems, but the critical issues are mostly down to 3 things:

- energy policies of the past decades was a desaster, mostly ruined by the conservatives. Germany was at some point a pioneer of solar tech, but it got crushed by economic policies favoring fossils, now china owns the majority of this rapidly growing market, and Russian pipelines are gone.

- extremely strong car manufacturer lobby that gets heavy subsidies and economic policies favoring car infrastructure. Public transport got defunded/privatized, transitioning to non-fossil transport options is fought tooth and nail, with heavy propaganda, so that many citizens even are aligned with that.

- heavy industry/manufacturing is a big chunk of BIP. Directly hit by the energy price hikes.

… all of which in general can be solved with cheap/abundant energy. Turning the expensive fossil dependency into green energy would be a literal multiplier for everything else in the country. We don’t have nuclear energy anymore (wrong decision imo) but lots of EU neighbors that do and help us in times of need.

It’s not even a technical problem anymore, and we have a shit ton of SME across the country that can engineer stuff. It’s purely a lobbyism/corruption problem with political will and media campaigns. Right now we have a Green Party in our government and they get an absurd amount of flak for trying to turn the ship around after decades of conservative corruption and mismanagement. Everything they do gets spinned into doomsday speech from the right to the point of blatant lying, and ordinary people just want to believe it.

I have no idea how to fix these hatestorms and misinformation amounts going around. But the point is: if we somehow manage to get into large scale renewable energy, BIP will skyrocket.

blueflow• 3 years ago

Public transport got defunded/privatized

Source? I haven't seen any of that. With the Deutschlandticket, stuff even got cheaper.

anonyfox9• 3 years ago

Privatization of deutsche Bahn comes to mind, and Deutschlandticket is actively being sabotaged by the neoliberals, so it might no longer exist next year for „fiscal reasons“ - even though it costs less than some miles of just another autobahn in berlin

codethief• 3 years ago

I think GP is referring to Deutsche Bahn.

ZeroGravitas• 3 years ago

The new renewable policies they passed last year seem positive:

https://www.renewableenergymagazine.com/panorama/germany-app...

As long as they don't get voted out and replaced by far right goons with conspiracy theories about heat pumps then Germany should do okay.

anonyfox9• 3 years ago

The problem is that it’s a real thread right now. Again rightwingers may ruin the show for everyone.

Jeff_Brown• 3 years ago

"Helped by weak yen" is a little misleading. It suggests the exchange rate exogenously impacts the relative value of an economy's output. If Japan was producing a ton of good stuff, and then its money devalued, why would that reduce the value of what it made?

In fact, of course, exchange rates are endogenous. The value of the yen reflects (among other things) the relative value of what Japan makes to what other countries make. If a currency's value falls (and there was no change in the money supply) what it means is people value that country's output this year less than they did last year.

Retric• 3 years ago

Exchange rates reflect cash flows not just total economic output.

Foreign investors poring money into a country will prop up exchange rates even without any changes in total economic output. Similarly outflows from foreign investment dividends depress exchange rates.

wolverine8765• 3 years ago

I thought (not being in finance) that the exchange rate reflects supply and demand for Yen, which depends on:

* Demand for products sold internationally and denominated in Yen (not US dollars, for example).

* Demand due to perceived risk of the Yen's future value

* Supply of Yen printed by the government

* Supply due to Yen sold to purchase imports

Maybe some other things I'm not thinking of.

xyzzy47472• 3 years ago

The Yen will ultimately go to zero as Japan ages and depopulates. Germany is boosted by greater immigration, but otherwise native Germans aren’t having many kids either.

reustle• 3 years ago

To zero? Don’t you think Japan will open for more immigration before something that drastic happens? I lived there for 7 years, and while they are ridiculously slow, they aren’t blind.

xyzzy47472• 3 years ago

Japan is very ethnocentric so I can see it going either way.

Bubqeenn4• 3 years ago

I get the GDP stats, but we already heard how Russia is weaker than Italy, and so on.

There is India, Russia, Brazil... Is Germany really bigger than them?

Wytwwww4• 3 years ago

how Russia is weaker than Italy

Isn't it?

I don't see how anyone could argue than Germany's economy isn't much bigger than that of Russia or Brazil.

WhereIsTheTruth2• 3 years ago

The US refer to them as "multiethnic democracies" (2008), I wonder if they'll be split at some point (too big), it's already kinda happening in Brazil, Lula ordered to protect the amazon and "its people"

There was a map shared during the CSCE that pictured the different regions of Russia, I can't find the article anymore.. sad

wolverine8765• 3 years ago

Lula ordered to protect the amazon and "its people"

How does protecting the very small minority in the Amazon cause a 'split' of Brazil, in any significant sense? They could create a national park too.

wolverine8765• 3 years ago

There is India, Russia, Brazil... Is Germany really bigger than them?

Economically, yes, and for decades if not for your lifetime depending on your age and how we account for East Germany. India and Brazil being in the conversation is a 21st century phenomenon (a very good one!).

keiferski11• 3 years ago

Interesting to compare the optimism in the article and comments with a recent video by Peter Zeihan: The End of Germany as a Modern Economy.

https://youtu.be/xmEhTFjQB1g?si=C02yoH1nFWmzWPlQ

Germany to Pass Japan as Third-Largest Economy, Helped by Weak Yen

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