Japan May Have Lowest GDP among Major Economies in 2060

Jiji Press

16:35 JST, March 4, 2024

TOKYO (Jiji Press) — Japan will have the lowest real gross domestic product per capita among all major economies in 2060 if its low productivity growth remains roughly the same under a declining population, a government estimate showed Thursday.

Presented at the day’s meeting of the Council on Economic and Fiscal Policy, headed by Prime Minister Fumio Kishida, the estimate is part of a macroeconomic scenario drawn up by the Cabinet Office for use in discussions on priority issues in the country’s economic and fiscal policies.

Kishida said that it is necessary to take a “structural” approach in order to improve productivity, expand labor participation and raising the birthrate.

He said the government will draw up a political policy package for the next three years or so for system reforms allowing the country’s competitiveness and birthrate to improve by 2030, when the depopulation will get more serious.

The package will be included in the government’s basic economic and fiscal management guidelines due out later this year, he added.

The estimate supposes that the annual productivity growth rate will stay at 0.5%, similar to levels in recent years, and that the total fertility rate, or the number of children born per woman in her lifetime, will stand around 1.36 in 2070, against 1.33 in 2020. The Cabinet Office also hypothesizes that more elderly people will join the workforce.

The scenario envisions a long period of sluggish economic growth, forecasting that the GDP in price-adjusted real terms will grow at an average rate of 0.2% between fiscal 2025 and fiscal 2060.

Real GDP per capita, which stood at $41,000 in 2020, will be $62,000 in 2060, likely to be overtaken by Britain and France, which both had smaller per capita GDPs than Japan as of 2020.

If Japan manages to boost its productivity growth to 1.4% and its birthrate to around 1.8, the average level in the 1980s to the 1990s, and makes a significant improvement in the labor participation situation, its real GDP will grow by around 1.7% on average. The per capita GDP will stand at $94,000, nearing the $96,000 forecast for the United States.