Weekly insights into our crazy world.

Friday, August 20, 2010



It's been RUMORED to happen for years, but the official stats are now in: According to a Japanese government report, the nation's GNP growth grew a measly 0.4% in the last financial quarter. This puts the island nation's nominal GNP (a figure not adjusted for price and seasonal variations) at $1.286 trillion. China, who's quarterly growth was ten times of Japan's, now has a nominal GNP of $1.335 trillion. This means that for the FIRST TIME EVER China's economy is the second largest on earth!

Now this many seem trivial to some...but let's face it...this list doesn't change very often. The last time a nation in the top two spots switched was way back in 1968, when Japan nudged WEST GERMANY out of the #2 spot. And, unless Europe manages to merge into one country, it likely won't change for another 42 years either. How has this bombshell affected world economies? The Dow Jones fell 73 points. The French CAAC and German DAX stock markets also dropped sharply. The Japanese Nikkei naturally fell the most, hitting a thirteen-month low. Ouch!

While the Japanese mourn, the Chinese can celebrate. After all, China can truly now claim that the boisterous, robust nation is the main reason for the world's slow, but steady, climb out of massive recession. With 10% growth, it is indeed a global beacon. But, amongst the top five economies, China is definitely a black sheep. With an average personal income of just $3,600, it has a huge gap between rich and poor. China relies heavily on other nations purchasing their exports, which...as we all know...aren't always the best products. On the other hand, Japan is the world's largest producer of cars and technological products. When this sector sees slow growth, it is much more alarming to the world economic machine. It shows how demand, particularly in Asia, is cooling considerably.

Naoto Kan, Japan's prime minister, knows the heat is on. But he's trying to downplay it as mere statistical nonsense. Or, as Kyohei Morita, the chief economist as BARCLAY'S CAPITAL in Tokyo said: "We should be more concerned about per-capita GDP. This this just symbolic. It's nothing more than that." Let's hope he's right, or we'll all be driving some pretty cheap Chinese cars real soon!

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