Experts make prediction following 2009 results. Japan’s GDP is up in fourth quarter 2009 thanks to public spending. As domestic consumption is expected to slow, exports to China and the rest of Asia should pick up the slack.

Beijing (AsiaNews/Agencies) – China is set to become the world’s second largest economy, replacing Japan, just behind the United States. Fourth quarter growth in 2009 in Japan was less than expected compared to China, which is already on a path to recovery.

Real Japanese GDP grew at an annual pace of 4.6 per cent in the October-December period, but dropped for the whole of 2009 by a 5.0% in inflation adjusted terms. Japan's nominal GDP for the 2009 calendar year came to about US$ 5.1 trillion, up from US$ 4.9 trillion in 2008.

Experts note that recovery was less than expected and what did take place was due to government largesse.

GDP rose for three consecutive quarters and looks unlikely to retreat this year. Consumer spending, which accounts for about 60 per cent of the economy, rose 0.7 per cent in the last quarter of 2009.

Shoppers took advantage of incentives on cars and home appliances. More confident companies are also starting to invest in factories and equipment.

The outlook, however, remains uncertain. Analysts predict that consumer demand will almost certainly decelerate. Exacerbating woes is a vicious cycle of falling prices and wages, along with a shrinking population and tax base.

By contrast, China's economy is expanding rapidly. Fourth-quarter growth jumped to 10.7 per cent, bringing overall growth last year to 8.7 per cent.

Takuji Okubo, the chief economist at Société Générale in Tokyo, told the South China Morning Post that he expects China to overtake Japan as the world’s second largest economy this year. Japan had held that position for the past 40 years.

In many ways, Japan needs a strong China. It is soaring demand from China and other Asian markets that has lifted Japan from its own downturn, helping to offset persistent domestic weaknesses.

Japanese exports in December rose for the first time since late 2008, powering industrial production up 2.2 per cent from the previous month.

In an embarrassing series of revisions, Japan’s Cabinet Office downgraded third quarter GDP results, first cutting a preliminary figure of 4.8 annualised per cent growth to 1.3 per cent several weeks later, then admitting yesterday that there was no growth at all in the July-September period.

Other countries have had to do the same.

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