Latest Japanese government estimates show that China has overtaken Japan as the world's second largest economy. Japanese officials confirmed the estimates Monday, when they announced the country’s gross domestic product, the broadest measure of its economy, shrank in the final three months of 2010.
The statistics say the country's economy declined 0.3 percent as domestic consumption slowed down. But Japanese Economic Minister Kaoru Yosano says the decline is temporary. "The data confirmed Japan’s economy was standing still in the October to December quarter. But we now see signs of the economy picking up, as car sales and production seem to have bottomed out," he said.
Although Japan's economy still managed to beat expectations, growing 3.9 percent for the calendar year, it wasn’t enough to maintain Japan’s 40-year lock as the world’s second largest economy.
That title now belongs to China, with a total domestic output last year of nearly $5.88 trillion - compared to Japan's $5.47 trillion.
Beijing economist Sang Baichuang says the figures are good for bragging rights, but in terms of purchasing power, he says Chinese consumers lag well behind those in Japan. "Our economy surpassed the Japanese economy, but our average GDP per capita is only one-eleventh of the Japanese economy. So we cannot be satisfied only with the total GDP. China’s economic prosperity is still relatively smaller," Baichuang said.
Analysts say Japan’s third place ranking comes as no surprise given China’s large population of 1.3 billion people. In contrast, Japan’s population is nearing 130 million.
Bank economist Masayuki Kichikawa says China’s growing economy is good for Japan, because it will mean more consumers for Japanese goods.
"This should be viewed more positively from the viewpoint of the Japanese because probably Chinese people would begin to consume more high-end durable goods such as automobiles. And probably China would become a very good market for Japan," said Kichikawa.
Despite the global downturn, economists credit China’s booming economy for helping to boost growth around the world, including the world’s biggest economy - the United States, which has an annual domestic output nearly three times the size of China’s.