Rocky Vega

Just as Japan’s economy has been slumping over the past two decades, China’s has been vigorously building steam. And, as Bill Emmott points out in an article today, it won’t be long until Japan gets bumped down a notch and China takes its place as the world’s second largest national economy after the US.

Emmott downplays the significance of the particular data point, but notes that it’s an interesting, and potentially fortuitous, moment in time for Japan. From the Times Online:

“The statistical point can be dealt with simply. Does any German remember the moment in the 1970s when Japan overtook West Germany as the world’s second-biggest economy? With a much larger population (120 million now, against 82 million Germans) it was natural for Japan’s output to be bigger once it approached German productivity levels. So it is with China, only more so, since its population of 1.3 billion is ten times Japan’s. Thus, its economy will “surpass” Japan’s at a time when its income per head is less than one tenth as large. And, if China did not have an artificially cheap currency, it would have overtaken Japan already.

“Those income-per-head comparisons help to show why to be overtaken is good for Japan. To find yourself plonked just off the coast from a huge population of eager new consumers is a wonderful opportunity. China is already Japan’s biggest trading partner, and Japan sells a lot more to China than it buys from it. If the Chinese currency is revalued this year — and especially if the market is eventually allowed to set its exchange rate — the terms of trade will move even more in Japan’s favour, both for goods and for services.”

The Daily Reckoning’s Bill Bonner has also seen promise in that weakened Asian economy, and earlier this month cited Japanese stocks as the opportunity of the decade:

“While there are many things that seem likely to go down, there aren’t many that seem destined to go up. Let’s see, what has been beaten down, dissed, battered, and abused for the last 20 years or more? What is it that people don’t want? What is it that they expect to go down…possibly forever?

“Of course…Japanese stocks!

“So there is our Trade of the Decade:

“Sell US Treasury debt/Buy Japanese stocks.”

It’s an important story worth following, and you can read more about the relationship between the economies of Japan and China in the Times’ coverage of how after years of stagnation Japan is stirring.

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

Recent Articles

The Awful Way Social Security Might Be “Saved”

Dave Gonigam

The US Social Security program is complete mess. The funds needed to pay these benefits are quickly drying up, and agreeable solutions are in short supply. But all is not lost... There actually IS a viable way to "save" Social Security. But as Dave Gonigam explains, you're probably not going to like it. Read on...


Important Facts You Need to Know the Ebola Outbreak

Stephen Petranek

This summer, the worst Ebola outbreak ever recorded hit sub-Saharan Africa. But the greatest danger, as Stephen Petranek explains, is that the virus will have a chance to mutate into a form that spreads more easily. And if that happens, there will be far reaching consequences - from both a health and an investment side. Read on...


Laissez Faire
A Free Way to Turn Your Unique Skill Into Real Money

Chris Campbell

Everyone in the world has a unique talent or skill that someone else might find useful. Whether it's editing video, speaking Spanish or even eating paper, chances are there is someone out there willing to pay for what you have to offer. Today, Chris Campbell shows you one way to find those consumers and how to make your skill work for you...


The End of the “Gun Control” Bull Market

Greg Guenthner

For the last few years, gun enthusiasts have been concerned that the Feds would find a way to block their access to firearms. Now those fears appear to be subsiding... and so do gun sales. Greg Guenthner explains how to navigate this market in the coming months and years. Read on...


The Most Important Trait of Any Successful Resource Investor

Henry Bonner

The gold mining sector is one of the most difficult areas of the market to navigate successfully. But there is money to be made here. Henry Bonner sits down with one of the giants of this industry and picks his brain about how to find winners in this market and the four things every great investment has in common. Read on...