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Monday, February 14, 2011

China Replaced Japan in 2010 as No. 2 Economy

Japan’s economy contracted in the fourth quarter when compared with the previous three months, though analysts are optimistic about the country’s prospects for the rest of the year.

Japan’s gross domestic product fell 0.3 percent in the October-December quarter as the end of generous government incentives on environmentally friendly cars resulted in a temporary decline in spending. At an annualized rate, Japan’s economy shrank 1.1 percent from the previous quarter.

The contraction, the first in five quarters, brought Japan’s economy for 2010 to $5.47 trillion, the Japanese Cabinet Office said. That compared with a $5.88 trillion economy for fast-growing China. The latest numbers were further evidence of China’s rapid ascent as an economic superpower, as China surpassed Japan last summer after the half-year gross domestic product numbers were released. Just five years ago, China’s gross domestic product was around $2.3 trillion, about half Japan’s.

Japan’s economy has stagnated over the last two decades, reflecting its continued decline in economic and political clout.

The country had the world’s second-largest economy after the United States for much of the last four decades. In the 1980s, its rapid growth even led to talk of the Japanese economy’s overtaking that of the United States.

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