February 19, 2025
TOKYO – Japan’s annual gross domestic product has exceeded ¥600 trillion for the first time over a full year. This can be said to be a milestone for the nation, but the people, who are suffering from high prices, are not feeling elated.
It is important to achieve an economy in which people can feel well-off.
According to preliminary GDP figures for 2024 released by the Cabinet Office, the nominal GDP, which includes the influence of inflation, increased by 2.9% from the previous year, recording growth for the fourth consecutive year. The monetary value was ¥609.3 trillion.
It took nine years to achieve this mark, after the administration of then Prime Minister Shinzo Abe set the goal of reaching ¥600 trillion in 2015.
Internationally, GDP is an important indicator of national power, and achieving this goal carries a certain degree of significance.
However, it must be said that the rate of growth up to this point has been slow.
Since the 1990s, Japan has been in a long period of stagnation with low wages, low prices and low growth, and it has taken 32 years to increase GDP by ¥100 trillion. The growth model of the post-war period, in which the economy was driven by the manufacturing industry and GDP increased by ¥100 trillion every five years, has lost its competitiveness.
During that period, the nation’s GDP has been overtaken by China and Germany and has fallen from second to fourth place in the world. It is believed that it will also be overtaken by India before long.
If the scale of the Japanese economy as a proportion of the global economy shrinks, it will become more and more disadvantaged in price negotiations and business deals.
In addition, the decline in national power is also reflected in the form of the weaker yen. For Japan, which relies on imports for much of its energy and food, it will directly lead to increased burdens and will put pressure on household finances.
The government must constantly revise its strategy to accelerate growth, rather than feeling relief for reaching the GDP goal.
Even though nominal GDP has reached a significant level, the public cannot feel the benefits. That is because the GDP figure is not a reflection of the strength of the real economy but is largely due to high prices.
The real GDP, which excludes the influence of inflation, for 2024 was almost flat, having increased by only 0.1% from the previous year.
The real GDP for October-December 2024, which indicates the current status of the economy, recorded an annualized increase of 2.8% for the third consecutive quarter of growth.
However, with prices rising, particularly for rice and foodstuffs, there is a growing tendency to save money, and individual consumption, which accounts for the majority of GDP, still lacks strength.
To overcome high prices and achieve a virtuous cycle in the economy, it is essential to continue to raise wages as the result of the shunto spring wage talks to lead to an expansion in individual consumption.
Companies should direct their huge retained earnings toward positive investment, such as the creation of new businesses. A shift to a “growth-oriented economy” in which both wages and investment increase must be steadily promoted.