Register now for Fin24 Dashboard and get access to portfolios, watchlists, financial comparison tools, and a whole lot more to help you achieve your financial goals.

Data provided by McGregor BFA
All data is delayed
Loading...
Where am I? Home
 
Prices are delayed by 15min.
Join the Fin24.com conversation about JSE-listed stock by using every time you tweet.

Japan must harness China's rise - analysts

Aug 17 2010 12:05 AFP

Related Articles

Japan still bigger than China

Japan govt vows budget austerity

Japan business leaders fear stalemate

IMF unfazed on Japan debt

Millions of Japanese trapped in 'hidden poverty'

Japan's new PM takes power

 

Top Stories

Cell C move sparks price war

May 27 2012 11:21

There's a price war raging between South Africa's cellphone networks after Cell C lowered the rates of its prepaid calls by more than 34%.

Another golf estate victim

May 27 2012 13:09

The oversupply of golf estates has claimed another victim.

MyCiti buses running at a loss

May 28 2012 07:53

The City of Cape Town has spent R175m running the Myciti bus service since the Soccer World Cup compared to an income of R35m, a report says.

 
Share Share line Print

Tokyo - Eclipsed by China after posting its weakest growth in three quarters, Japan must now safeguard its fragile recovery and work to benefit from the rise of its huge economic neighbour, say analysts.

As cooling exports and flat domestic consumption dragged on Japan's growth in April-June, Monday's data pointed to the looming prospect of China overtaking Japan as the world's second-largest economy this year.

Pressure is now on Japan to remedy the economic woes that threaten to derail its recovery, while working to reap the benefits of the rise of China, the world's number-one export market.

"China has replaced Japan as the centre of Asia," said Takahide Kiuchi, senior economist at Nomura Securities. "Japan now needs to take advantage of growth in China and the rest of Asia."

Japan's real gross domestic product growth fell to an annualised 0.4% in the quarter, down from a revised 4.4% in the previous three months, while missing forecasts of 2.3% growth.

In nominal terms Japan's second quarter GDP was smaller than China's, at $1.288 trillion compared with $1.336 trillion, the government said.

Japan's post-war "economic miracle" put it at number two behind the US for more than 40 years, but stagnation after its property bubble burst in the 1990s has helped put China on course to supplant it this year.

China has already claimed the titles of world's biggest exporter, auto market and steelmaker.

"It's no surprise given the huge difference in population of both economies," said Yoko Takeda, senior economist at Mitsubishi Research Institute.

Japan remains more than ten times richer on a per-capita basis, according to the International Monetary Fund.

Loosen monetary policies

"But China's economic growth is a plus, rather than a minus, for Japan's economy because China will grow as a market for Japanese exporters," Takeda added. Japan's exports to China rose 22% on-year in June.

While China's soaring growth reflects a shift in economic power as the country continues its transformation from poverty-hit communist state to global heavyweight, it also highlights the need for Japan to re-energise its economy.

"Japan's economy is slowing as the rapid rebound from the global financial crisis cannot continue forever," said Kiuchi, noting that the expiry of stimulus packages and a stronger yen have exacerbated the country's weakness.

Despite crawling out of a severe year-long recession in 2009, Japan's fragile recovery remains beset by deflation, high public debt, weak domestic demand, softening exports and a strong yen.

All of which pose a challenge for Prime Minister Naoto Kan's government and its agenda focused on cutting the industrialised world's biggest public debt, at nearly 200% of GDP.

Committed to cutting spending and recently proposing doubling sales tax to 10%, the government has signalled it will consider further stimulus.

But for Japan to re-boot growth, it needs to be less reliant on exports, boost domestic demand and attract more foreign investment, analysts say.

"Japan can also explore the potential of the Chinese market for its service sector, including retail and insurance sectors," said Kiuchi.

Shipments of cars, gadgets and components have been crucial in off-setting weaker demand at home, but there is concern Japan may be hit by Beijing's efforts to cool China's economy and fragile eurozone and US demand.

A strong yen, which recently touched a 15-year high against the dollar, is hammering overseas profits of makers such as Sony, Nintendo and Toyota.

"The government can mitigate the impact of the stronger yen by nudging the Bank of Japan to loosen monetary policies," said Kiuchi. "Monetary easing is the only way to help Japanese exporters."

The central bank has long kept its key rate at a rock-bottom 0.1%, but analysts say its options are limited given that the yen's strength is derived from fears for the global economy and dollar weakness.

But amid hopes the government will conjure a bolder monetary policy to soothe the economy, Japan is resigned to its redefined place in the world behind China.

"I'm not happy about the news but I think it was inevitable," said Emiko Harada, 38, a shopkeeper in Tokyo's upscale Ginza district.

"It was surprising in the first place that a small country like Japan was second in the world. We did well."

 
 
Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
It pays to know the cost and what you’re getting in return
May 28 2012 09:33

Investors may not have a clue what they’re paying their money managers or they type of service they’re getting, or, whether they can actually negotiate lower fees. (Reuters)

Sasha

"In the short term this is true, Greece will dominate the headlines on a day to day basis, until their next elections when there would be some clarity to answer the question, "What next for Greece?" Amazingly everyone except the politicians seem to be lining themselves up for worst case scenario, b... Read their blog...

Recently updated
Podcasts
The Sishen saga

Legal expert Peter Leon on the increasingly complex legal wrangle over the Sishen Iron Ore mine. Time: 8:17 Listen Here...

Before you list

Is the clarion call of the JSE calling? Listen to Fin24’s expert panel discussion before you list your small business. Time: 17:29

Compare and Buy

Compare and apply for hundreds of financial products from many suppliers.

Credit cards Medical aid Current accounts Think Money

Money Clinic

Money Clinic Do you have a question about your finances? We'll get an expert opinion.
Click here...

Loading...