India expected to overtake Japan as world's 4th largest economy in 2027: IMF

The International Monetary Fund (IMF) projects India to surpass Japan as the world's fourth-largest economy by 2027, according to recent projections. Japan is forecasted to fall to the sixth position that year, trailing behind India and the United Kingdom. In 2026, India's growth is expected to reach 7.0 percent, while Japan's growth is projected to slow down to 0.7 percent.

This is largely due to Japan's aging population and structural problems that have caused its growth to stagnate. India, on the other hand, entered the current energy price shock from a strong position, with strong fundamentals, fiscal prudence, and substantial reserves. The IMF's Asia Director, Krishna Srinivasan, noted that India responded well to the shock, which has resulted in a robust economic growth.

However, Japan's growth is expected to be negatively impacted by soaring energy prices resulting from the Iran war, along with an increase in consumer prices since the spring of 2022. Additionally, Japan's aging population is also having a negative impact on its economic activity. The fall of the yen, which reached its lowest level against the dollar in 40 years over the summer, is also adding to the cost of imports.

Despite these challenges, Japan's economy is seeing a surge in investments in artificial intelligence, but not to the same extent as its neighboring countries.