Japan

Japan remains world's second largest economy

Reuters

Japan has narrowly retained its title as the world's number two economy ahead of China and extended its recovery from a brutal recession, especially in the fourth quarter of 2009. Japan reported a 1.1 per cent increase in the economy from October to December last year for an annualised pace of 4.6 per cent.

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This is good news for the Japanese government which had feared its country would be overtaken and lose its 40-year lead over China's economy.

Yet investors have reacted cautiously to the latest figures after the government downgraded its estimate for the third quarter to show zero growth.

The recovery comes despite Japan's gross domestic product (GDP) diving last year due to falling exports and factory output during the global economic downturn.

However, analysts have warned that with China expected to enjoy another year of strong growth in 2010, Japan still risks ending this year in third place worldwide as it struggles to cope with renewed deflation and a shrinking population.

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