What once seemed improbable became possible when the Spanish economy produced higher GDP per capita, a metric closely linked to living standards, than the G7 member Japan, according to IMF data.
This, in itself, doesn’t mean that the Southern European economy is bigger than Japan’s when comparing its overall value of goods and services.
But when Spain’s GDP is divided by the number of people living in the country and turned into US dollars, the GDP per capita in current prices turns out to be higher than that of Japan’s. In 2025, the GDP per capita denominated in US dollars was $33,960 in Japan, whereas in Spain it came to $36,190.
This same figure was already slightly higher in the Southern European economy than in the Asian tech-oriented economy in 2024.
“There is a real story behind this, but also a big caveat,” pointed out Ángel Talavera, Head of Europe Economics at Oxford Economics.
While the Spanish economy has been one of the fastest-growing, “this figure is also driven by a statistical artifact,” he told Euronews Business.
“The Japanese yen has depreciated 40% since 2021, which means that even if Japanese GDP per capita in local currency remains unchanged, it is 40% lower when measured in US dollars,” he said.
This means that a large amount of Japanese economic data has deteriorated significantly in recent years when measured in US dollars needed for international comparisons.
What drove Spanish growth over the past few years?
Spain, which emerged from the financial crisis a little over ten years ago, expanded its economy by 3.2% in 2024, outperforming France, Germany and Italy, the three biggest economies in the eurozone. The German economy, Europe’s biggest, contracted by 0.2%.
Spain’s GDP was driven up by strong domestic demand, robust tourism, and other services.
The service sector provides a little over two-thirds of the country’s economic output, and improvement on this front is one of the key reasons behind Spain’s success.
“Global tourism has benefited this economy more strongly than it has benefited Japan,” said Matthieu Gertken, BCA Research’s Chief Geopolitical Strategist.
In Spain, growth was also strengthened by strong government support and lower energy prices than in other European countries. Significant population growth also contributed to improved output.
Gertken added that Spain’s strong economic performance in the last decade has been supported by “brutal reforms and a major adjustment in labour costs in the wake of the European Sovereign Debt Crisis last decade, that have boosted its competitiveness”.
During the financial crisis, unemployment in Spain was around 25%, one of the highest in the EU. There was a tendency for struggling businesses to favour temporary staff contracts, and in response, Spain approved reforms to soften employee protection in permanent contracts. Reducing firing costs and workers rights, among other reforms, improved labour mobility, helping to match positions with skilled workers, leading to improved productivity.
What is constricting Japan's economy?
Meanwhile, Japan's "ossified labour market means that its labour productivity remains poor,” Gertken added.
Japan, the fourth-largest economy in the world, has been struggling to maintain its leading role in the global economy, losing its spot as the third biggest economy to Germany last year. IMF data suggests that in 2025, Japan is expected to be overtaken by India as well, falling to fifth position in terms of GDP.
The technology-driven Japanese economy has barely grown in the last three decades, and it was hit hard by the COVID-19 pandemic. Its GDP collapsed by 4.2% in 2020.
Japanese research firm Nikko Research Center said in a recent report that the country has been struggling due to the lack of innovation.
The report also noted that in the year 2000, Japan’s GDP per capita was ranked globally the second highest after Luxembourg. It is now the 38th.
Japan’s current economic performance doesn’t point to a quick turnaround. The economy shrank in the first quarter, driven by weak exports. This is coupled with a sluggish domestic demand, rising inflation and slow production. US tariffs and tariff threats are damaging exports and industrial production, fuelling fears that Japan’s economy could go into recession in the second quarter.
The Japanese economy is sustained by a lot of fiscal stimulus, focusing on energy subsidies, wage support, and digital infrastructure.
The continuing lethargy in the Japanese economy is also fuelled by its ageing population, resulting in acute labour shortages and mounting social security costs.
Is this a short-lived success for the Spanish economy?
Service-driven economies such as Spain are projected to outperform in the future, too, as consumer trends are shifting across the globe.
Overall, the contribution of services to economies worldwide has increased significantly. The service sector’s share of global GDP increased from 53% to 67% between 1970 and 2021, according to the World Trade Organisation (WTO).
According to the IMF, Spain's GDP per capita is expected to remain ahead of Japan's until the end of its current forecast, in 2030. Spain's GDP per capita is expected to exceed $42,300 while Japan's will remain around $41,700, based on current trends.
