Japan now number three

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For decades, Japan ranked as the world's second largest economy. Now it's been overtaken by China. But as Akiko Fujita reports from Tokyo, many in Japanese aren't surprised.

KATY CLARK: China said today it's still a developing nation. That follows word that China has overtaken Japan to become the world's second-largest economy. The US still holds first place. But Japan's been in second place for decades. Still, as Akiko Fujita reports from Tokyo, many were expecting this flip in standing.

AKIKO FUJITA: News of China's economy overtaking Japan's wasn't greeted with much fanfare in Tokyo. Japan's economic minister downplayed the change telling reporters it didn't matter which country was number two or number three. And in Tokyo's Otemachi business district today, some people seemed to agree.

JAPANESE SPEAKING

FUJITA: [PH] Yoshi Hadamogi shrugged off the news saying it was only a matter of time. But 65-year-old [PH] Hitako Matsanaga is more concerned. She says this is just the beginning of Japan's slide.

JAPANESE SPEAKING

FUJITA: We will continue to fall in the rankings, she says. I think we'll eventually fall out of the top ten. Still the Japanese have been bracing for this shift in standing for some time now. Nearly 20 years after the country's economic bubble burst, the economy remains stagnant while the Chinese have enjoyed double-digit growth. The changes are evident in Tokyo's shopping districts where Chinese tourists often outnumber Japanese customers at luxury stores.

CHINESE SPEAKING

FUJITA: This woman from Shanghai says she traveled to Tokyo because she heard designer bags were a better quality in Japan. She shopped for her second Gucci bag while her husband bought a $4,000 Rolex watch. The Japanese Tourism Agency says Chinese visitors spend more than visitors from any other country. That's a big reason the Japanese government relaxed visa requirements for Chinese tourists last month, making it easier for them to come here. The agency wants to triple the number of Chinese visitors in the next six years. It's increased ads in China and urged employees of major hotel chains and airports to learn basic Mandarin and Cantonese. It's also adding Chinese translations to signs in train stations, while more retail stores are beginning to accept Chinese debit cards. The agency says it needs the Chinese to keep Japan's struggling tourism industry afloat. But Japanese leaders know China's prosperity alone won't boost their stagnant economy. Prime Minister Naoto Kan is expected to discuss new economic stimulus measures when he meets with the head of the central bank next week. But Hitako Matsanaga in the Otemachi business district says it will take more than that to turn Japan's fortunes around.

JAPANESE SPEAKING

FUJITA: She says it's time to do some soul searching. It's time for the country to go back and reflect on what made Japan so successful in the first place. For The World, I'm Akiko Fujita in Tokyo.