Persistent high prices and stagnant real wages. Amidst the sense of stagnation surrounding our lives, the government’s 24 trillion yen “Comprehensive Economic Measures” are drawing attention.
Based on the latest analysis by Daiwa Securities Senior ESG Strategist Satoshi Osanai, we explore how these economic measures could reshape our future and unravel the background behind the shocking prediction that “Japan will be overtaken by India by 2025.”
What Are the “Three Pillars” of the 24 Trillion Yen Economic Stimulus Package?
This economic stimulus package is not merely a handout; it is structured around “three pillars” designed to address Japan’s structural challenges.
① Immediate Measures to Protect Households from Rising Prices
These are direct support measures for household finances, such as resuming subsidies for electricity and gas bills and providing cash payments to low-income households.
The aim is to prevent a decline in consumer spending.
② Growth Investment to Awaken Japan’s Earning Power
We will concentrate investment in cutting-edge fields such as AI (artificial intelligence), next-generation semiconductors, and GX (Green Transformation).
These are the “next-generation infrastructure” and will be key to Japan’s international competitiveness.
③ Ensuring the Safety and Security of the People
This represents investment in strengthening Japan’s foundations amid heightened geopolitical risks, including enhancing defense capabilities and disaster prevention measures.
Shocking Forecast: Japan’s Nominal GDP to Fall to 5th Place Globally by 2025
The “reversal in GDP rankings” is now a major topic of discussion in economic circles.
According to IMF (International Monetary Fund) projections, Japan’s nominal GDP is highly likely to be overtaken by India by 2025, causing it to fall to 5th place globally.
For Japan, which once boasted the world’s second-largest economy, this represents a major turning point.
- Why is Japan being overtaken?
Beyond the impact of yen depreciation, India’s explosive population growth and digital expansion are key factors. - What path should Japan take?
With its population declining, Japan urgently needs “structural reforms” to boost productivity per worker.
“Fresh Money” of ¥21.3 Trillion. Expected to Boost Real GDP by 1.2%
Among the measures announced, the portion of so-called “fresh money” directly injected using national funds and other sources amounts to approximately ¥21.3 trillion.
According to Mr. Osanai’s analysis, if implemented, this is expected to boost real GDP by about 1.2%.
However, challenges remain.
- Fiscal Sustainability
Securing funding through government bond issuance carries the risk of future long-term interest rate increases. - Stimulating Private Investment
The success hinges on how effectively companies respond to government stimulus by increasing capital investment and raising wages.
Summary: How Should We Navigate This Economic Turning Point?
As pointed out by Satoshi Osanai of Daiwa Securities, Japan now stands at a critical juncture: either breaking free from deflation or becoming entrenched in low growth.
For investors and business professionals, this economic policy serves as a crucial roadmap for identifying which industries will attract capital.
We must heighten our focus on growth sectors like AI and GX to prepare for this era of rapid change.
