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China''s rise lifts Japan: the latest figures show that a rising China is less threat than potential savior.

Article Excerpt
FOR MORE THAN A DECADE, pundits have been hopefully calling the bottom of the cycle and willing the world's second biggest economy to finally recover from the bursting of the 1980s bubble; they have been answered with over 10 years of disappointment and deepening slump.

That long run of misery has generated a view which holds that Japan may now never reproduce the sort of aggressive, export-led growth that made it such a fearsome force in the past. Looming over that reasoning is the growing influence and prosperity of China, and at a quick glance it does appear to pose a colossal threat. China also seems to be aiding and abetting Japan's other chief source of strife by "exporting deflation" to Japan via cheaply produced goods.

The reality is rather different, however, and a flurry of summer numbers have forced Japan's doubters into a rapid rethink. As China holds the limelight with preparations for the 2008 Beijing Olympics and the 2010 International Expo in Shanghai, observers are quietly reaching a strange conclusion. The events in China will likely create far longer-term prosperity for Japan than for China.

Central to the emerging new view is the fact that Japanese exports to China and the rest of Asia have never been stronger, and last year pushed through to record highs. Even the ravages...

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