It was somewhat comforting for the German soul plagued by fears of decline when it was recently announced that Germany had overtaken Japan as the world's third-largest economy. Germany's GDP in 2023 stood at 4.46 trillion dollars compared to Japan's 4.21 trillion dollars. However, the fact that this change in position is solely due to the exchange rate effect when converting nominal GDP into US currency (cf. BZ, February 16) did not fit into the quick headlines. When viewed in local currency, Japan still shows a real GDP growth of 1.9%, compared to a contraction of 0.3% in Germany. And particularly significant for the Japanese spirit: Japan's nominal growth of 5.7% surpassed China's 4.6% for the first time in nearly half a century.

The examination of GDP and thus the look into the economic rearview mirror can vary significantly depending on the perspective or choice of lens. What matters most is the forward-looking view. It is determined by the competitiveness of an economy and its companies, by government framework conditions, and the willingness of people to perform. Japan's international competitiveness was not in good shape for many years. Productivity stagnated, there was a lack of investment, and deflation rewarded hoarding money. But now the situation is changing. The yen's strong depreciation against the US dollar due to Japan's hesitant interest rate turnaround has boosted exports (up 11% in the fourth quarter). Strong profit increases have lifted corporate investment sentiment.

Markets famously trade future expectations, and the development of the Japanese stock market speaks volumes. International investors are betting on Japan mobilizing its long-dormant potential. The Nikkei 225 stock index gained a proud 28% in 2023 compared to a respectable 20% for the Dax 40. Since the beginning of the year, the Nikkei has increased by another 16%, while the Dax has only risen by about 3%. And unlike previous years, Japan's stock market is hardly being pumped up by the central bank anymore. In 2023, the Bank of Japan, which had been employing quantitative easing since 2010 not only through bond purchases but also extensive ETF acquisitions, was reportedly a net seller of Japanese stocks or ETFs.

The demographic developments, that weigh even heavier on Japan with its aging and shrinking population since 2010 than on Germany, have triggered a readiness for change in the Land of the Rising Sun. A readiness that is still far from being embraced here at home. Although the working-age population (15- to 64-year-olds) in Japan has been declining since the mid-1990s, the number of employed people increased year by year until the pandemic. The recipe: More and more women are joining the workforce, and more and more retirees are continuing to work, often in different professions.

The willingness to reform also characterizes the industrial world, where Japan's long-prevailing fortress mentality of the Japan Inc. gives way to international standards of corporate governance. More and more Japanese companies are becoming investable for international investors, and capital is flowing into the country. The fact that the Taiwanese chip manufacturer TSMC is building and commissioning two new factories in record time in Japan, with Japanese companies as co-investors, is a prime example of the successful industrial policy of the government. Japan and Germany are not only similarly sized economies, but many of their problems are comparable. And both countries are in recession. But while Germany is still debating the right response to this, action is being taken in Japan. Among the blind, the one-eyed man is king.