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160967
Mon, 02/14/2011 - 17:49
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Japan confirmed no longer world's No. 2 economy as China rises
TOKYO, Feb. 14 Kyodo - The Japanese government confirmed Monday that the country's economy has lost its position as the world's second biggest to China, while releasing the latest growth data that showed the first contraction in five quarters amid weak consumption.
Japan's gross domestic product shrank a seasonally adjusted, annualized 1.1 percent in real, or price-adjusted, terms in the three months through December, the Cabinet Office said in a preliminary report. Private consumption dropped 0.7 percent, given the diminishing effects of the government's fiscal stimulus measures.
The office also said the value of Japan's nominal GDP, which is before adjustment for price changes, stood at $5,474.2 billion in 2010 -- lower than China's $5,878.6 billion -- meaning Japan lost the world's No. 2 position after the United States for the first time since 1968.
GDP is the total value of goods and services produced domestically.
''I think we should welcome the economic development of neighboring countries,'' Prime Minister Naoto Kan told reporters. Japan ''wants to foster its own economy through cooperation'' with those countries.
The contraction in the October-December period was slower than expected, however, as analysts surveyed by Kyodo News forecast real GDP declining an average 2.2 percent. The result raises hope that the economy will get back on the recovery track soon, helped by recoveries in exports and corporate capital spending.
''With the negative growth, the pausing of the Japanese economy was confirmed,'' Takahide Kiuchi, chief economist at Nomura Securities Co., said in his report. But he also said, ''It is important that the result came in relatively stronger than forecasts.''
The real GDP fall corresponds to a 0.3 percent decline from the previous quarter, which compared with the average projection of a 0.6 percent drop.
On a nominal basis, the economy shrank 0.6 percent and an annualized 2.5 percent. The GDP deflator, a wider gauge of inflation than the consumer price index, lost 0.4 percent, confirming that Japan has been mired in deflation.
In the whole of 2010, the economy grew a real 3.9 percent for the first rise in three years, after plunging 6.3 percent in 2009 due largely to the global economic slowdown after the financial turmoil. In nominal terms, the economy expanded 1.8 percent, also the first gain in three years.
China released its 2010 data last month, registering a price-adjusted 10.3 percent growth.
This reflected the increasingly important roles played by fast-growing, emerging-market nations such as China and India in the global economy, although their respective per capita GDPs are much smaller than those of advanced economies, and disparities in the economic growth enjoyed by those major developing countries have been widely seen as an issue the international community must address.
In the reporting quarter, consumer spending, which makes up about 60 percent of Japan's GDP, dropped especially because of weaker auto sales in reaction to last-minute buying before the expiration in September of a government subsidy program for the purchase of environmentally friendly vehicles. The stimulus measure had helped boost the economy in the previous quarter.
The tobacco price hike in October, which prompted smokers to stock up before its introduction, also had a negative effect on the consumption component of the latest GDP.
Corporate capital spending rose 0.9 percent, while public investment decreased 5.8 percent.
''Growth turned negative on extraordinary factors,'' economic and fiscal policy minister Kaoru Yosano told a press conference after the figures were released.
''The situation surrounding Japan's economy is not necessarily bad,'' he said. ''The Bank of Japan and the government have the same view that the economy seemingly is at a standstill, but will turn upward.''
Exports fell 0.7 percent with imports down 0.1 percent. Trade pushed GDP down 0.1 percentage point, while domestic demand subtracted 0.2 point from the growth rate.
A stronger yen as well as slowing production in some Asian neighbors significantly weighed on the country's exports, even as some economists said they had expected a weaker reading for exports, while stressing they expect a recovery in the January-March quarter on a pickup in the U.S. economy.
''The Japanese economy is likely to return to the (growth) path it had treaded, led by external demand,'' said Hiromichi Shirakawa, chief economist at Credit Suisse Securities (Japan) Ltd.
Shirakawa said domestic demand would remain stagnant as companies have yet to fully recover their confidence, shifting more money to business investment, while private consumption would run out of steam given the waning of the government's fiscal stimulus packages.
Japan's gross domestic product shrank a seasonally adjusted, annualized 1.1 percent in real, or price-adjusted, terms in the three months through December, the Cabinet Office said in a preliminary report. Private consumption dropped 0.7 percent, given the diminishing effects of the government's fiscal stimulus measures.
The office also said the value of Japan's nominal GDP, which is before adjustment for price changes, stood at $5,474.2 billion in 2010 -- lower than China's $5,878.6 billion -- meaning Japan lost the world's No. 2 position after the United States for the first time since 1968.
GDP is the total value of goods and services produced domestically.
''I think we should welcome the economic development of neighboring countries,'' Prime Minister Naoto Kan told reporters. Japan ''wants to foster its own economy through cooperation'' with those countries.
The contraction in the October-December period was slower than expected, however, as analysts surveyed by Kyodo News forecast real GDP declining an average 2.2 percent. The result raises hope that the economy will get back on the recovery track soon, helped by recoveries in exports and corporate capital spending.
''With the negative growth, the pausing of the Japanese economy was confirmed,'' Takahide Kiuchi, chief economist at Nomura Securities Co., said in his report. But he also said, ''It is important that the result came in relatively stronger than forecasts.''
The real GDP fall corresponds to a 0.3 percent decline from the previous quarter, which compared with the average projection of a 0.6 percent drop.
On a nominal basis, the economy shrank 0.6 percent and an annualized 2.5 percent. The GDP deflator, a wider gauge of inflation than the consumer price index, lost 0.4 percent, confirming that Japan has been mired in deflation.
In the whole of 2010, the economy grew a real 3.9 percent for the first rise in three years, after plunging 6.3 percent in 2009 due largely to the global economic slowdown after the financial turmoil. In nominal terms, the economy expanded 1.8 percent, also the first gain in three years.
China released its 2010 data last month, registering a price-adjusted 10.3 percent growth.
This reflected the increasingly important roles played by fast-growing, emerging-market nations such as China and India in the global economy, although their respective per capita GDPs are much smaller than those of advanced economies, and disparities in the economic growth enjoyed by those major developing countries have been widely seen as an issue the international community must address.
In the reporting quarter, consumer spending, which makes up about 60 percent of Japan's GDP, dropped especially because of weaker auto sales in reaction to last-minute buying before the expiration in September of a government subsidy program for the purchase of environmentally friendly vehicles. The stimulus measure had helped boost the economy in the previous quarter.
The tobacco price hike in October, which prompted smokers to stock up before its introduction, also had a negative effect on the consumption component of the latest GDP.
Corporate capital spending rose 0.9 percent, while public investment decreased 5.8 percent.
''Growth turned negative on extraordinary factors,'' economic and fiscal policy minister Kaoru Yosano told a press conference after the figures were released.
''The situation surrounding Japan's economy is not necessarily bad,'' he said. ''The Bank of Japan and the government have the same view that the economy seemingly is at a standstill, but will turn upward.''
Exports fell 0.7 percent with imports down 0.1 percent. Trade pushed GDP down 0.1 percentage point, while domestic demand subtracted 0.2 point from the growth rate.
A stronger yen as well as slowing production in some Asian neighbors significantly weighed on the country's exports, even as some economists said they had expected a weaker reading for exports, while stressing they expect a recovery in the January-March quarter on a pickup in the U.S. economy.
''The Japanese economy is likely to return to the (growth) path it had treaded, led by external demand,'' said Hiromichi Shirakawa, chief economist at Credit Suisse Securities (Japan) Ltd.
Shirakawa said domestic demand would remain stagnant as companies have yet to fully recover their confidence, shifting more money to business investment, while private consumption would run out of steam given the waning of the government's fiscal stimulus packages.
