Japan still world's 2nd largest economy

Japan, China in Race to Be World's No. 2 Economy.

Retaining its position as the world's second largest economy, Japan's economy grew at a faster-than-expected pace of 1.1% in the last three months of 2009.

China, the fastest growing large economy, clocked a growth rate of 10.7% in the quarter ending December 31, 2009, bringing it within sniffing distance of surpassing Japan as the world's second largest economy.

The Japanese cabinet office today said the "island nation's economy, which is primarily export-driven, rose 1.1% in the fourth quarter of 2009".

On an annual basis, the country's gross domestic product (GDP) expanded at a much higher pace at 4.6%.

For the whole of 2009, the Japanese economy shrank 5% and is valued at 474.92 trillion yen (about US$5.1 trillion), according to official data.

Last month, China said its 2009 GDP was "33,535.3 billion yuan (about US$4.91 trillion), up by 8.7% at comparable prices".

Severely hit by the global financial meltdown, the Japanese economy has slumped into one of its worst recessions in recent history. This has brought down the GDP gap (in US dollar terms) between Japan and China to a narrow range.

Japan climbed out of recession in the June quarter of 2009 after clocking a growth of 1.3%.

Meanwhile, the better-than-expected Japanese growth in December quarter was mainly driven by better exports and the effects of stimulus measures.

In 2009, the Chinese economy expanded at a stunning rate of 8.7%, primarily on the back of improved domestic output driven by government stimulus and a tightly held yuan.

Despite the GDP rising at a good rate in the December quarter, the export-driven Japanese economy is expected to see sluggish growth in the near term.

Going by the latest figures, the Japanese economy witnessed zero growth in the September quarter of 2009. Interestingly, preliminary estimates had pegged the GDP to expand at 1.2% for that period. The figure was later revised to 0.3%.

To bolster the recession-hit economy, Japan had unveiled stimulus measures worth over US$130 billion.