Japan Surpassed by Rest of Asia
But now after the 16.8% upward revision of China's GDP and the continuing higher growth rate in Asia in general and China in particular relative to Japan as well as the relative fall in the yen's real exchange rate, the rest of Asia have now surpassed Japan in GDP at current exchange rates.
This trend of higher GDP growth in the rest of Asia relative to Japan is likely to continue for three reasons: 1) Japan have a much higher initial per capita income than the rest of Asia and other things being equal, a lower per capita income is usually associated with higher growth 2) Japan's population have already started to shrink and is far older than the rest of Asia and its working age population is set to decline significantly during the next decade. Even if the average retirement age is increased, this means that the potentail growth is lower than the rest of Asia, where birth rates declined much later than in Japan. 3) Japan have a much higher burden from the welfare state than other Asian countries and a far higher budget deficit and government debt. While the burden of government spending is low compared to Western Europe, it is much higher than in most other Asian countries.