Japan to be world's 3rd largest economy is good news

“China poised to pass Japan as world’s No. 2 economy,” reports CNN.com. Q2 GDP figures from Japan and China show the latter exceeding the former, $1.34 trillion vs. $1.29 trillion. In 2009, it was Japan ahead for the full year, at $5.07 trillion compared to China at $4.91 trillion, according to the IMF. Given the two lost decades now in Japan, this was only a matter of time. Jesper Koll’s (veteran Japan economy expert now with JP Morgan in Tokyo) simple forecast (see quote below) represents a real and substantial opportunity for Japan. This is not a new idea or sudden realization by any means, but it is far more tangible now than ever before; it is becoming more palpable given recent developments such as the Japanese government actively courting Chinese tourists.

“Basically, China’s underlying growth rate is going to be about 8 percent over the next decade. Japan’s underlying is going to be about 1 percent. In 10 year’s time, the Chinese economy will be twice the size of the Japanese economy.”

Continued Chinese economic growth is unequivocally good news for the Japanese economy in terms of being not just another jump-start, but also an important sustained source of demand for exports and domestic services alike, that has otherwise proven elusive.

Disclosure: The author holds no positions in any Japan or China-focused funds, but may have a long/short position at any time in the future. At present, the author is focused on engaging the management and board of a longtime shareholding, Internet Initiative Japan (IIJI) (JP: 3774), in order to unlock and enhance shareholder value.

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