Japan lost its 42-year ranking as the world’s second-biggest economy to China in 2010, with data out Monday showing a contraction in the last quarter due to weak consumer spending and a strong yen.
While Japan was expected to fall behind a surging China in the year, the data underlined the weak state of a Japanese economy burdened by deflation, soft domestic demand and pressured by the industrialised world’s biggest debt. “It is difficult for the deflation-plagued Japanese economy to achieve self-sustained growth,” said Naoki Murakami, chief economist at Monex Securities.
While China’s leap forward reflects a shift in economic power as the country transforms itself from poverty-hit communist state to global heavyweight, it highlights the need for shrinking Japan to energise its economy, analysts said. Japan’s post-war “economic miracle” put it at number two behind the United States for more than four decades, but stagnation after the Japanese property.