Paradigm Shift
South Korea’s nominal GDP per capita is expected to exceed Japan’s this year. In 2021, the GDPs of the country were US$35,003 and US$39,301, respectively. The figures are estimated to have changed to US$33,591 and US$34,357 in 2022.
According to experts, the former is likely to exceed the latter this year because of exchange rate factors. “A very strong USD started last year and the value of JPY vis-à-vis USD dropped 20 percent from the end of 2021 to the end of November 2022, when the value of KRW fell about 10 percent,” one of them said, adding, “Despite the Japanese government’s effort, the value of JPY hit a 32-year low, close to JPY150 per USD, in October last year, and yet the Bank of Japan is not raising its key rate due to the national debt exceeding JPY1,000 trillion.”
South Korea’s credit ratings are already higher than Japan’s. Last year, South Korea’s Fitch, S&P, and Moody’s ratings were AA-, AA and Aa2, respectively. In that period, those of Japan were A, A+ and A1. These ratings were given with the South Korean economy showing solid growth, the Japanese economy remaining sluggish for long, and the two countries’ national debt ratios at 50 percent or so and over 250 percent, respectively.
Experts point out that the GDP gap is likely to increase over time, and this has to do with labor productivity. “South Korea’s labor productivity has raised its GDP per capita by 5 percentage points in the 2020s and the figure of Japan is no more than 2 percentage points,” one of them explained, adding, “In that period, South Korea’s and Japan’s per-capita GDP growth rates have been 4.8 percent and 1.3 percent on an annual average basis, respectively.”