China overtakes Japan as world’s Number 2 economy

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Japan’s gross domestic product fell less than estimated in the fourth quarter in a pullback that may prove temporary as overseas demand revives production after the nation fell behind China as the world’s second-largest economy.

The annualized 1.1 percent drop in GDP in the three months through December was driven by a slowing in exports and fading of government stimulus programs, Cabinet Office figures showed today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was for a 2 percent drop.

Japan’s stocks rallied amid confidence the global economic recovery will strengthen as oil prices retreat and international political tensions subside with the resignation of Egyptian President Hosni Mubarak. The rebound is set to benefit Japanese exporters, with Toyota Motor Corp. and Komatsu Ltd. this year raising profit forecasts because of increasing sales abroad.

Full Story: Japan Economy Shrinks Less-Than-Estimated 1.1%, Surpassed by China in 2010 – Bloomberg