China Thwarts Japan's Economy, Stands No 2 In 2010

By ETHAN Markoff

JAPAN NEWS - China has replaced Japan in 2010 and becomes the second largest economy after the United States. It is a shock to Japanese economic foundation, which had its position for much of the last four decades, and almost surpassed even the United States for its exponential growth curve in 80s. Japan's economy had experienced its decline in the fourth quarter when compared with the previous three months, falling 0.3 percent in the October-December quarters as the end of the government incentives on environmentally friendly cars gave a negative impact on people's spending habit. At a result, Japan's economy shrank 1.1 percent annually from the previous quarter.

The contraction in the Japanese economy has led the country to suffer in front of rival China whose economy has risen to $5.88 as compared to Japan’s economy for 2010 to $5.47 trillion. This figure also testifies that China has tremendously raised economically in the recent years and holds a position as an economic superpower. Just five years back, China's was far more lagged behind Japan with gross domestic product was around $2.3 trillion, about half Japan's.

China is in the peak of its urbanization and industrialization, whereas Japan's economy is quite old now. Despite rapid economic growth, China's per-capita income is about $3,600, less than Japan. Initially Japan's economy had benefited from China's growth as trading shifted production and took advantage of lower costs, and small businesses gained profit, holding increasing attractive market for Japanese goods.

However, Japan's economy had contracted in the fourth quarter, it expanded 3.9 percent over all in 2010 compared with a year earlier.

Japanese government expressed its concern and showed optimism about its economic assessment and said the economy could soon rebound, as exports and factory output are gained by the steep demand China and other growing economies in Asia.

In the October-December quarter, the spending of people rapidly fell down to 0.7 percent for generous government benefits for fuel efficient cars. The recent high tax levied on tobacco also affect cigarette sales. Net exports were hurt by a surge in the yen to 15-year highs, which affected Japanese exports. Other factors include such as capital investment rose 0.9 percent that fell short of the 1.5 percent from the previous quarter.

However, the country's GDP did not affect the stock market and it rose to 0.8 percent at midday Monday.