Sunday, February 14, 2010
Japan stays ahead of China - for now
This article is written in comparison of the quaterly GDP of Japan and China. Many economists predicted that China will go ahead of Japan in 2009; but the recently published GDP results explains that Japan is still ahead of China. Being 10th times the size of Japan and having a GDP growth of nearly 10% China will undoubtedly over take Japan some time near future. But since Japan bailed out some cash in the recent recession through government spending and since Japan had a high net export figures in 2009, it is still the reigning second largest economy.
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This is good news for Japan, the bad news is that the GDP growth isn't from private investment. As you said Taimur, instead the growth comes from government spending and high export.
ReplyDeleteI agree with Anthony on the notion that growth resulting from increased government stimulus and high export is not sustainable. Japan has always been famous for its high-quality electronic goods and automobiles which are exported to many countries, but export sales of these products are heavily dependent on the business cycles of importing countries' economies, making them highly cyclical. Moreover, the current increase in government spending is simply temporary. Bail-out money will soon be withdrawn by the Central Bank, i.e. when the economy begins to recover. Therefore, it is likely that Japan will not be able to maintain its high growth rate of 4.6 percent.
ReplyDeleteTwo factors have led to Japan's better than expected financial results 1) growth in export demand, especially from China and the rest of Asia 2) stronger government consumption driven by stimulus funding,
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