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Japan plays third fiddle to China and US

Japan has fallen behind China as the world’s second largest economy following a Q4 GDP contraction.


Official figures show Japan’s economy contracted by 1.1% in Q4 2010 at a value of around $5.5trn (£3.4trn). The value of China’s economy was $5.8trn in the last three months of last year on the back of its output growing by 10%.

Economists estimate that China’s will be the largest economy between the end of this decade and the middle of the 2020s. China continues to be Japan’s main trading partner so its continued strength will continue to benefit Japan.

The economic figures coming out of Japan are concentrated on low domestic consumption, prolonged deflation and the largest national debt in the developed world. One figure of strength, its currency, has actually proven to be a weakness, with the yen gaining strength against other currencies and reaching a 15-year high against the dollar.

The economic picture is just part of the story, as the world’s second largest economy is still developing. Japanese individuals are close to ten-times richer than their Chinese neighbours, with GDP per capita of $40,000 compared to $4,500.

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