China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower.

Japan’s nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said.

China led the world out of last year’s global recession with an economy that’s more than 90-times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978. The country of 1.3 billion people will overtake the U.S., where annual GDP is about $14 trillion, as the world’s largest economy by 2027, according to Goldman Sachs Group Inc. chief economist Jim O’Neill.

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The World Council of Churches has reaffirmed the vision of a world without nuclear weapons, in marking the anniversary of the atomic bombing in 1945 of Hiroshima and Nagasaki in Japan.

“Sixty-five years on, nuclear bombs still threaten humanity and deny a lasting peace,” WCC general secretary the Rev. Olav Fykse Tveit said in advance of the Aug. 6 anniversary of the dropping of an atomic bomb on Hiroshima in the closing days of the Second World War.

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The causes of Japan’s lethargy and deflation rest in a failure to push ahead with structural reforms such as in postal savings or cuts to corporate tax rates that would unleash animal spirits, not a shortage of liquidity.

Mr. Bernanke may take comfort that Japan’s situation is in key respects different from America’s. For instance, U.S. households are more prone to consuming than their Japanese peers, and American banks and companies less averse to risk (sometimes to an extreme, as we’ve discovered in the past few years). Mr. Bernanke’s own exceptionally easy monetary policy has already filtered through the economy and has shown up in higher prices in nations pegged to the dollar and in higher global commodity prices (until the recent flight to the safety of dollar assets).

Still, for an economist who has famously examined Japan’s lost decade to avoid a recurrence in America, Mr. Bernanke could usefully come away from his Tokyo sojourn with a few updated lessons in mind. The most important message he could spread when he gets back to Washington is that for all monetary policy’s importance, it’s no substitute for pro-growth fiscal and regulatory policies.

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The fear that began in Athens, raced through Europe and finally shook the stock market in the United States is now affecting the broader global economy, from the ability of Asian corporations to raise money to the outlook for money-market funds where American savers park their cash.

What was once a local worry about the debt burden of one of Europe’s smallest economies has quickly gone global. Already, jittery investors have forced Brazil to scale back bond sales as interest rates soared and caused currencies in Asia like the Korean won to weaken. Ten companies around the world that had planned to issue stock delayed their offerings, the most in a single week since October 2008.

The increased global anxiety threatens to slow the recovery in the United States, where job growth has finally picked up after the deepest recession since the Great Depression. It could also inhibit consumer spending as stock portfolios shrink and loans are harder to come by.

“It’s not just a European problem, it’s the U.S., Japan and the U.K. right now,” said Ian Kelson, a bond fund manager in London with T. Rowe Price. “It’s across the board.”

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By 1982, GM had had enough and put the Fremont factory out of its misery, Two years later, GM and Toyota reopened the factory with ”” incredibly ”” most of the same workforce.

But first, they sent some of them to Japan to learn the Toyota way.

The key to the Toyota Production System was a principle so basic, it sounds like an empty management slogan: Teamwork.

At Toyota, people were divided into teams of just four or five and they switched jobs every few hours to relieve the monotony. A team leader would step in to help when anything went wrong.

At the old GM plant in Fremont, Calif., the system had been totally different and there was one cardinal rule that everyone knew: the assembly line could never stop.

“You just didn’t see the line stop,” Madrid said. “I saw a guy fall in the pit and they didn’t stop the line.”

This is just a fabulous story. Don’t miss the image of a single bolt. read or listen to it all.

While Britain was panicking about a sterling crisis and the terrifying financial consequences of a hung parliament, I spent last week in Japan. It was a good vantage point to put Britain’s financial and political travails into perspective.

Japan’s budget deficit of 10.5 per cent of GDP is this year second to Britain’s among the G7 countries, but in every other respect the fiscal situation in Japan is far worse. Because the Japanese Government has borrowed similarly prodigious sums almost every year since 1990, it carries by far the world’s heaviest debt load, with net public debt now running at 115 per cent of GDP, about the same as in Italy and Greece. And there is not the slightest prospect of any reduction in borrowing in the foreseeable future because of the political situation in Japan. It has had four prime ministers in three years, its civil service is in more or less open warfare with the elected politicians and there has been no effective government since the resignation of Junichiro Koizumi in 2006.

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A wonderful photo from the winter Olympics.

When Toyota’s president, Akio Toyoda, apologized for the recalls that have marred Toyota’s reputation, he talked not just about his company’s fate, but also his nation’s.

“I hope to return Toyota to profit and contribute to the revitalization of Japan,” he said.

Once a leading symbol of Japan’s rise to global economic might, Toyota has become one of the most visible signs of its decline. And even before the recalls, Japan’s rivals from South Korea and China had started overtaking Japan in key industries from semiconductors to flat-panel televisions.

“At this rate, Japan will sink into the sea,” said Masatomo Tanaka, a professor at the Institute of Technologists, a university that specializes in training engineers. “If Toyota is not healthy, then Japan is not healthy.

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Guess before you look.

(ACNS) The Archbishop of Canterbury, Dr Rowan Williams, currently visiting the Anglican Church in Japan, today took part in an Act of Remembrance at the epicentre of the atomic bomb blast in Nagasaki. During the Act of Remembrance, Dr Williams laid flowers at the memorial and spoke about the pressing importance of working for a world free from nuclear weapons:

“There are no victories in human history without their element of tragedy. Victory in human affairs always means that someone has lost …sometimes the victory has been gained at the price of such violence that we have to say that everyone has lost. Those who have won the conflict have lost some dimension of their own life, their own welfare and integrity.”

“To see the effects of the use of the atomic bomb here in Nagasaki is to see how this degree of slaughter and violence leaves everyone defeated. The wholesale killing of the innocent and the destruction of an entire environment, natural as well as cultural, the long-term effects, physical and psychological, on those who survived – all of this constitutes a would that affects the attackers as well as the victims.”

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Simplicity comes first. We do not proclaim ourselves, says St Paul, we don’t offer ourselves as the answer to everyone’s questions. We bring the knowledge of the great gifts God has given in his promise of reconciliation and renewal, and we bring our own struggles to live in the atmosphere of reconciliation and renewal ”“ pointing always to God as the one who begins the whole story and brings it to its full realisation. We learn to walk lightly and to travel light, grateful for the gifts of human culture but not making them an absolute.

Risk and solidarity come next. We don’t seek to protect ourselves, to do no more than keep the little circle of the Christian family warm and secure. We walk along the roads of human suffering, accompanying the lost and anxious and oppressed in the name of Jesus.

And reverence comes third. We approach our neighbours not with arrogance and impatience but with a readiness to learn and a willingness to rejoice in the rich texture of their human lives, individual and cultural. We look and listen for God in all that lies before us.

If we can continue in this ‘barefoot’ mission, we shall be opening ourselves up to the simplicity of Jesus himself and so to the transforming grace and beauty of his own mission.

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As part the150th anniversary celebrations of the Anglican Church in Japan, the Archbishop of Canterbury will be making a week-long visit to Japan during which he will visit Anglican churches, universities and schools, as well as the city of Nagasaki.

Dr Williams will preach at the service to celebrate the 150th anniversary of the Anglican Church in Japan (known as Nippon Sei Ko Kai) and will be joined by other bishops and Primates from around the Anglican Communion.

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Japan is a decent, consensual and egalitarian country. Much of it is still prosperous, despite a dismal period for the economy. The beliefs of its two main political parties are often hard to tell apart. Both their leaders are grandsons of (rival) prime ministers. There were no loud celebrations when the results of the general election were announced on August 30th. It is tempting therefore to write it off as no earth-shattering event.

That would be a mistake. The vote, in which the Democratic Party of Japan (DPJ) broke the half-century lock of the Liberal Democratic Party (LDP) on power, marked the overdue destruction of Japan’s post-war political system. The question is what will now take its place.

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Japan’s voters Sunday soundly rejected the ruling party that has set the nation’s course for more than half a century, choosing instead an untested rival to grapple with a weakening economy and an aging society.

The historic change in government could usher in a new era for Japanese politics that replaces the staid consensus that guided Japan in its postwar boom years with a more fractious, competitive environment. But it also raises major questions about whether the newcomers can solve Japan’s deep structural problems and reassure a people increasingly uncertain about their future.

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Madeline Gianforte sees no conflict between the vows she took as a Catholic Sister of St. Agnes and her role as a master of reiki, a Japanese healing practice.

But her church does.

Co-founder of the natural healing center CORE/El Centro on Milwaukee’s south side, Gianforte employs reiki to help clients work through pain, both physical and emotional.

“It’s a very spiritual, very prayerful experience for people,” said Gianforte, one of a number of Catholic practitioners in southeastern Wisconsin. “It’s about finding balance between the body, mind and spirit.”

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Japan’s offer, extended to hundreds of thousands of blue-collar Latin American immigrants, is part of a new drive to encourage them to leave this recession-racked country. So far, at least 100 workers and their families have agreed to leave, Japanese officials said.

But critics denounce the program as shortsighted, inhumane and a threat to what little progress Japan has made in opening its economy to foreign workers.

“It’s a disgrace. It’s cold-hearted,” said Hidenori Sakanaka, director of the Japan Immigration Policy Institute, an independent research organization.

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To better compete, companies slashed jobs and wages, replacing much of their work force with temporary workers who had no job security and fewer benefits. Nontraditional workers now make up more than a third of Japan’s labor force.

Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption.

They tend to be uninterested in cars; a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales.

Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.

“I’m not interested in big spending,” says Risa Masaki, 20, a college student in Tokyo and a neighbor of the Takigasakis. “I just want a humble life.”

Japan’s aging population is not helping consumption. Businesses had hoped that baby boomers ”” the generation that reaped the benefits of Japan’s postwar breakneck economic growth ”” would splurge their lifetime savings upon retirement, which began en masse in 2007. But that has not happened at the scale that companies had hoped.

Economists blame this slow spending on widespread distrust of Japan’s pension system, which is buckling under the weight of one of the world’s most rapidly aging societies. That could serve as a warning for the United States, where workers’ 401(k)’s have been ravaged by declining stocks, pensions are disappearing, and the long-term solvency of the Social Security system is in question.

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The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

By then, Tokyo’s main Nikkei stock index had lost almost three-quarters of its value. The country’s public debt had grown to exceed its gross domestic product, and deflation stalked the land. In the end, real estate prices fell for 15 consecutive years.

More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”

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As the United States and other major countries prepare to combat the threat of deflation and recession with interest rates fast approaching zero, a five-year policy experiment in Japan shows how important it is to act quickly and boldly.

Japan fought its way out of deflation after a property and stock bubble burst in the 1990s with quantitative easing, a policy measure that involved flooding banks with far more cash than was needed to keep short-term rates at zero.

It was a groundbreaking experiment and took a long time to work because the Bank of Japan was slow to employ the entire gamut of policy options and spell out its goals in credible fashion.

These lessons are now acquiring a special relevance to the U.S. Federal Reserve, facing the risk of a Japan-style deflationary spiral after a mortgage market meltdown that battered the banking system and resulted in the worst bear market for stocks since the Great Depression.

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On Japan, the 120-page report said the country will face a “major reorientation” of its domestic and foreign policies yet maintain its status as an “upper middle rank power.”

It forecast Tokyo’s foreign policies “will be influenced most by the policies of China and the United States,” with a broad spectrum of options possible.

If China continues its current economic growth pattern, Japan will attach importance to maintaining healthy political ties and increase market access, possibly through forging a bilateral free-trade agreement, the NIC report said.

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