JAPAN: Economic growth slower than expected, nominal GDP overtaken by China and is no longer the world's second biggest economy

Record ID: 465681

  • Title: JAPAN: Economic growth slower than expected, nominal GDP overtaken by China and is no longer the world's second biggest economy
  • Date: 17th August 2010
  • Summary: TOKYO, JAPAN (AUGUST 16, 2010) (REUTERS) TOKYO STOCK EXCHANGE (TSE) BUILDING VARIOUS OF CIRCULATING ELECTRONIC STOCK BOARD VARIOUS OF TSE STAFF MONITORING TRADES ELECTRONIC STOCK BOARD ELECTRONIC STOCK BOARD SHOWING NIKKEI AVERAGE AT 9120.50 DOWN 132.96 MORE OF THE ELECTRONIC STOCK BOARD MORE OF CIRCULATING ELECTRONIC STOCK BOARD
  • Embargoed: 1st September 2010 13:00
  • Keywords:
  • Location: Japan
  • Country: Japan
  • Topics: Finance
  • Reuters ID: LVA93JTP09CPK1LWEW4SNB53HLYE
  • Story Text: Japan's economic growth slowed markedly in the April-June quarter, pushing Japan's GDP behind China's on a nominal dollar basis, according to Japanese government figures released on Monday (August 16).
    The quarterly expansion of 0.1 percent in gross domestic product (GDP) translates into an annualised growth of 0.4 percent, well below the median market forecast of 2.3 percent annualised growth and much less than the 2.4 percent annualised growth in the United States in the same quarter.
    Japan's second quarter GDP before seasonal adjustments totalled $1.2883 trillion against China's second-quarter unadjusted GDP of $1.3369 trillion, an estimate by Japan's Cabinet Office showed.
    Japanese government officials said the figures were misleading as the calculation methods differ between the two nations.
    "Whoever is top or bottom has no meaning. It only represents each country's current economic health. Our country's development closely follows that of China's and other Asian nations', and that is also part of our growth strategy," added Japanese Economic minister Satoshi Arai.
    Analysts add that most people were expecting China to overtake Japan soon and the issue was mostly a political one. Economically, the benefits outweigh the risks, they add.
    "It is true that there is a negative element in that as China's technology improves, Chinese companies will compete with Japanese companies. However there is a large positive element in that with more growth in China, more people will be buying Japanese products, so overall the development of the Chinese economy is a good thing for Japan," Hideki Matsumura, senior economist at the Japan Research Institute told Reuters.
    Analysts predict further slowdown of the Japanese economy, adding to policymakers' difficulties as they grapple with deflation and a rise in the yen that threatens an export-reliant recovery.
    "Beyond the July - September quarter, growth will slow down even more as the effects of economic stimulus on the Japanese economy fade away fully. The current quarter's figures just illustrate the first effects of this," Matsumura added.
    Slowing growth in Japan's key export destinations such as the United States and China clouds the outlook, while policymakers step up efforts to talk down the yen after it surged to a 15-year high against the dollar this month at 84.72 per dollar.
    Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa are likely to meet later this week to discuss the yen's strength and possible responses, although analysts say likely options would be limited.
    Japan's Nikkei average slipped 0.9 percent on Monday after the release of the GDP data.
    But losses were limited after support for the benchmark held last week at just over 9,000, while charts showed it approaching oversold levels, suggesting it was perhaps due for a bit of a rebound.
    The benchmark Nikkei shed 86.53 points to 9,166.93 by midday, paring losses that at one point took it down nearly 2 percent to 9,095.94, within sight of the 13-month low of 9,065.94 hit last week. The broader Topix lost 1.2 percent to 821.46.
    The dollar dipped against the yen, losing 0.4 percent to 85.83 yen. It hit a 15-year low of 84.72 yen on electronic trading platform EBS last week.
    Market players said that while the yen's rise has yet to have much of an impact on company earnings forecasts for later in the year, that could change should the yen's advance continue.
    Japan's economy has been spotty since emerging from its worst recession since World War Two in the second quarter of 2009 on the back of exports, particularly to Asia, and government stimulus for spending on energy-efficient cars and electronics.
    China's top currency regulator had said on July 30 that his country had already overtaken Japan as the world's second-biggest economy, but this is the first time Japanese authorities have concurred with China's.
    However China's per capita income of about $3,800 a year is still a fraction of Japan's or America's.
    On the streets of Tokyo, the news was not all that surprising but opinions were mixed.
    "I think it's an obvious result. Japan brought factories there but ended up having their technology stolen," said Toshiaki Furuta, a 56-year-old businessman echoing the opinions of many across the nation.
    Some said Japan had only themselves to blame.
    "I think the reason for this is South Korean or Chinese as people are more "driven" than the Japanese," Furuta's 24-year old son Yasutoshi added.
    For some it was time to look more and more to China for future opportunities.
    "I feel I should have my children learn Chinese now," said Yuko Ito, a 44-year old homemaker on holiday in Tokyo and who usually lives in Singapore.
    Chinese tourists in Tokyo were pleased at the news.
    "I believe the Chinese economic strategy was well adapted to the situation. I believe the government's response to the economy's needs were successful," said Lin Zexiong , a business man and tourist from Guangdong, China.
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