China GDP overtakes Japan

City A.M. Reporter
JAPAN'S second-quarter GDP was less than China's before seasonal adjustments, government data showed, underscoring expectations that China will overtake Japan as the world's second-largest economy this year.

Japan's second-quarter unadjusted GDP totalled $1.2883 trillion on a nominal dollar basis, against China's second-quarter unadjusted GDP of $1.3369 trillion, an estimate by Japan's Cabinet Office showed.

But Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, told reporters that it would be misleading simply to compare quarterly growth figures for Asia's economic powerhouses, with a release from the Cabinet Office indicating that China does not release seasonally adjusted figures.

"It would be correct and fair to compare the figures for the whole year," Tsumura said. "It will be very misleading to simply compare quarterly figures."

In the first six months of 2010, Japan's GDP before seasonal adjustments totaled $2.5871 trillion, surpassing China's $2.5325 trillion.

"People have been expecting the Chinese economy to grow at a rapid pace and become physically larger than Japan for many years, so it is not a surprise," said Robert Feldman, chief economist at Morgan Stanley MUFG Securities in Tokyo.

"The issue is whether this will be a trigger for policy changes in Japan," he said, although he added that in the short-term, domestic political considerations were paramount as Prime Minister Naoto Kan struggles with a hung parliament and a potential leadership challenge from his own party.

"It will be used as a tool in the debate in Japan, but is not the essence of the debate itself. The debate is whether they want a growth strategy that hurts vested interests but will help the economy overall," Feldman said.

China's top currency regulator had said on 30 July that his country had already overtaken Japan as the world's second-biggest economy.