"No one thinks of Japan as a superpower anymore."
Japan's share of the Asia-Pacific economy has shrunk to about 10% from more than half just 26 years ago. Asian Development Bank President Masato Kanda cited the sharp decline in Japan's economic standing and warned that sweeping structural reform, including changes to the labor market, is needed to lift productivity.
'No One Thinks of Japan as a Superpower'
Kanda, a Japanese national, spoke about the shift in Japan's economic standing at a Yomiuri international economic forum held the previous day at the Tokyo Kaikan in Tokyo's Marunouchi district, the Yomiuri Shimbun reported on the 17th.
The numbers make the shift clear. Kanda said Japan accounted for more than 50% of the Asia-Pacific region's total gross domestic product in 2000, but that the figure had fallen to around 10% by 2025. China's share, by contrast, has approached 50%, while India has grown to roughly the same size as Japan.
Kanda stressed that Japan must overhaul its existing industrial and employment structures to regain competitiveness. He said the country needs to raise productivity and accelerate turnover in its economy, calling for fundamental structural reform starting with the labor market.
He also cautioned against viewing the weak yen as merely a foreign exchange issue. "Over the medium to long term, exchange rates reflect national strength," Kanda said, adding that raising the competitiveness of the economy itself is essential to preserving Japan's purchasing power abroad.
Korea May Overtake Japan in Exports as Chip Gap Widens
Signs of Japan's diminished standing have also appeared in recent trade data, with South Korea now likely to surpass Japan in annual exports for the first time this year.
As of the 5th of this month, Korea's cumulative exports for the year reached $709.4 billion, already exceeding last year's full-year total of $709.3 billion, according to the Korea Customs Service. Last year, Korea's annual exports stood at $709.3 billion against Japan's $738.3 billion, a gap of about $29 billion.
On a first-half basis, Korea has already moved ahead. Exports in the first six months totaled $496.3 billion for Korea, $416.6 billion for Taiwan and $384.4 billion for Japan. It was the first time Korea and Taiwan both overtook Japan for a first-half period.
Artificial intelligence chips drove the widening gap. First-half exports of integrated circuits reached $149 billion for Korea and $133.2 billion for Taiwan, compared with just $21.2 billion for Japan. Japan still holds an edge in semiconductor manufacturing equipment, however, exporting $15 billion worth over the same period, well ahead of Korea's $5.2 billion and Taiwan's $3.5 billion.
News of Korea's potential overtaking has drawn self-deprecation and unease online in Japan. Posts on X, formerly Twitter, included remarks that Japan stopped being Asia's leader long ago and that losing to a country with less than half its population is dangerous. Others argued that because the recent gap owes much to the AI chip boom, it remains to be seen whether the trend will hold over the long term.
Weak Yen Erodes Purchasing Power as Kanda Urges Labor Reform
National income figures are shifting as well. Korea's nominal gross national income rose 26.4% from a year earlier in the second quarter, according to preliminary second-quarter national income data released by the Bank of Korea on the 8th. The central bank said that if the current trend continues, Korea's per capita GNI is increasingly likely to top $40,000 for the first time this year.
Japan's per capita GNI, once above $40,000, has fallen back into the $30,000 range since 2024 amid stagnant growth and a weaker yen.
Kanda said the broader environment surrounding the Asia-Pacific economy is difficult, not just Japan's. "Energy prices have risen as the situation in the Middle East has deteriorated, and costs have begun passing through to prices for goods and services," he said, warning that inflation is likely to worsen over time. He also pointed to the rapid advance of AI as a factor adding to uncertainty in the global economy.
ADB data project that inflation in the region's emerging economies will rise 1.3 percentage points in 2026 from a year earlier, while GDP growth will slow by 0.6 percentage point.
Kanda stressed that such conditions call for bold reform alongside international cooperation. He said the ADB is pursuing measures including financial support for nuclear power projects and expanded lending to private companies, adding that a period of intense change is precisely when bold reform becomes possible.
