"Japan stopped being Asia's leader long ago."
Self-deprecating reactions are spreading across Japanese social media as South Korea moves closer to overtaking Japan in annual exports for the first time. With Korea — whose population is less than half of Japan's — having overtaken Japan in exports in the first half of this year and now on track to surpass it in per capita national income as well, concerns are mounting in Japan over its economy's prolonged stagnation.
Korea Already Passed Japan in First Half
Korea's cumulative exports this year reached $709.4 billion as of the 5th, according to the Korea Customs Service on the 9th. That already exceeds the $709.3 billion recorded for all of last year, and the milestone was passed in early September. If the current pace holds, analysts say annual exports of $1 trillion are within sight.
The chances that Korea will overtake Japan on a full-year basis for the first time have risen sharply. Last year Korea exported $709.3 billion and Japan $738.3 billion, a gap of about $29 billion.
The ranking has already flipped for the first half. The Nikkei compared trade data for Korea, Japan and Taiwan in dollar terms on the 7th of last month and found exports of $496.3 billion for Korea, $416.6 billion for Taiwan and $384.4 billion for Japan. Korea and Taiwan both topped Japan for the first time.
The biggest driver is artificial intelligence chips. First-half exports of integrated circuits came to $149 billion for Korea and $133.2 billion for Taiwan, against just $21.2 billion for Japan. Korea's first-half exports excluding semiconductors also rose 16% from a year earlier, according to the Ministry of Trade, Industry and Energy.
Japanese Reaction
News of Korea's advance drew a wave of anxious commentary online in Japan. One user on X, formerly Twitter, wrote that Japan had stopped being Asia's leader long ago.
Another asked whether low birth rates alone could explain the gap, noting that Korea faces the same challenges of falling births and population aging yet is pulling ahead. Others wrote that losing to a country of 50 million people, less than half Japan's population, was dangerous, and that neighboring Asian countries no longer regard Japan as an economic power.
Some recalled Japan's export controls on semiconductor materials bound for Korea. One user wrote that Japanese forecasts at the time predicted the destruction of Samsung and the collapse of the Korean economy, but that Korea responded by developing domestic materials and diversifying its suppliers.
Others argued the shift is temporary and tied to the chip boom. One user said the situation is being driven by an AI bubble and will not last forever, while questioning whether Japan should be funding overseas projects and calling for a full-scale focus on domestic investment.
Japan does remain strong in semiconductor manufacturing equipment. First-half exports in that category totaled $15 billion for Japan, far above Korea's $5.2 billion and Taiwan's $3.5 billion, according to the Nikkei.
Korea Nears $40,000 Income Club as Japan Slips Back
The two countries are also diverging on national income. Korea's nominal gross national income rose 26.4% in the second quarter from a year earlier, according to preliminary data released by the Bank of Korea on the 8th. Driven by the semiconductor export boom and a stronger won, per capita GNI is increasingly likely to top $40,000 for the first time this year.
"If there are no unexpected shocks for the rest of the year, and the annual growth rate of nominal GNI holds at the current level while the exchange rate remains stable, the likelihood that per capita GNI in U.S. dollar terms will exceed $40,000 has grown very high," said Kim Hwa-yong, head of the national income division at the Bank of Korea.
Japan's per capita GNI, by contrast, once topped $40,000 but fell back into the $30,000 range in 2024 as stalled growth combined with a weak yen.
The Nikkei said exchange rates and a semiconductor windfall alone cannot explain the gains by Korea and Taiwan. The two economies reaped large rewards by seizing on a moment in which giant technology companies are staking their futures on competition in advanced AI development, the paper said, warning that Japan could fall further behind in both manufacturing and services unless it builds a growth model suited to the digital era.
