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 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.
Lose your shirt in 3D printing stocks this year? Don’t kick yourself. You’re not alone. (Okay, kick yourself a little if it’ll make you feel better.) You need to make sure you don’t lose your 3D-printed shirt in the next tech craze. Because there will be a next time. Look, it’s really not your fault if you got taken for a ride on 3D stocks. Greg Guenthner has more...
Our friend Richard Duncan believes the U.S. economy requires credit growth to survive. Here, you’ll see what he thinks will happen if the U.S. doesn’t continue expanding credit. You’ll also find exclusive footage we shot in the Daily Reckoning’s studio explaining how the U.S. could lose it’s global dominance… and how programs like Social Security or Medicare could go bust...
The hum of the printing presses and the steady drip of cheap credit over the past five years made it easy to believe the U.S. economy was in a true recovery. But what happens when the excess liquidity begins to dry up?
The Americans who voted for Obama were expecting some big changes. But, six years later, the government he acquired has only spied harder, the drones have flown lower, and the weapons have gotten bigger. But don’t blame Obama. Read on…
All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...