California’s economy surpasses Japan’s as it becomes fourth largest in world

California’s economy has surpassed Japan’s, making the Golden state the fourth largest economy in the world, Governor Gavin Newsom announced on Thursday.

The state’s nominal GDP reached $4.1tn, according to data from the International Monetary Fund and the US Bureau of Economic Analysis, edging out Japan’s $4.02tn nominal GDP. California now ranks behind the US at $29.18tn, China at $18.74tn and Germany at $4.65tn.

Along with the tech and entertainment industry capitals, the state, which has a population of nearly 40 million people, is the center for US manufacturing output and is the country’s largest agricultural producer.

“California isn’t just keeping pace with the world – we’re setting the pace. Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation,” Newsom said in a statement.

The state has outperformed the world’s top economies with a growth rate in 2024 of 6% compared with the US’s 5.3%, China’s 2.6% and Germany’s 2.9%. This week’s new rankings come six years after California surpassed the United Kingdom and became the world’s fifth largest economy.

Newsom noted, however, that the Trump administration’s agenda endangers California’s economic interests.

“And, while we celebrate this success, we recognize that our progress is threatened by the reckless tariff policies of the current federal administration. California’s economy powers the nation, and it must be protected.”

California last week became the first state to sue the federal government over Donald Trump’s tariff policies, and has argued that the president’s actions are unlawful and that the constitution explicitly grants Congress the power to impose tariffs.

“No state is poised to lose more than the state of California,” Newsom said during a press conference announcing the lawsuit. “It’s a serious and sober moment, and I’d be … lying to you if I said it can be quickly undone.”

California is a major contributor to economic growth nationally, with the money it sends to the federal government outpacing what it receives in federal funding by $83bn, according to a statement from Newsom’s office.

Despite an enormous shortage of affordable housing that has fueled a homelessness crisis in the state, the population has grown in recent years. Meanwhile, last year the state reported its tourism spending had hit an all-time high – though California has seen a drop in some areas.

Canadian tourism in California was down 12% in February compared with the same month last year amid Trump’s tariff war. In response, the state has announced a new campaign to draw Canadians back, while one city has put up pro-Canada signs across its downtown.