New figures from Japan have confirmed what China knew in the middle of last year - it is the world's second-largest economy behind the United States.

Japan's economy fell 1.1 percent from a year earlier in the fourth quarter of 2010, the first contraction in five quarters, the Japanese Cabinet Office said yesterday.

Japan's economic output was US$5.47 trillion in 2010, compared with China's 39.79 trillion yuan (US$6.03 trillion).

China claimed the title of the world's second-largest economy in August last year when its gross domestic product in the second quarter surpassed that of Japan, which had held the title since 1968.

With a stable growth momentum and an advancing rate of 9.8 percent in the fourth quarter, China continued to strengthen that position.

In 2010 as a whole, China's economy expanded 10.3 percent year on year.

But China remains a developing country, Commerce Minister Chen Deming said last month in Davos, Switzerland.

According to the International Monetary Fund, China's GDP per capita was US$4,283 in 2010, ranking 95th worldwide. In contrast, Japan's per-capita GDP amounted to US$42,325, nearly 10 times that of China.

Japan's economics minister, Kaoru Yosano, described China's expansion as important for the Asia Pacific region and said he hoped for deeper economic ties between the two countries as China was now Japan's biggest trading partner and a significant source of growth for Japanese companies, Xinhua news agency reported.

"As an economy, we are not competing for rankings but working to improve citizens' lives," Yosano said. "We welcome China's economic advancement as a neighboring country."

Li Daokui, an academic adviser to the central bank and director of the Center for China in the World Economy at Tsinghua University, said China should take a low profile approach to the new ranking and continue to focus on development to improve people's livelihoods.

"It is no doubt a milestone for China," Li said. "But we have to know clearly the stark truth behind the laurel that China's per-capita GDP is very low."

Li said a rising ranking may even disturb China's development because some countries may be fearful of China's rise and treat it as a threat.

Economists said slowing demand from emerging economies, particularly in Asia, coupled with a strong yen which reached 15-year high against the US dollar during the recording period, weighed heavily on Japanese exports.

Analysts and government officials have predicted, however, that Japan will continue on a growth path in the January-March quarter.

Some analysts, including those at the World Bank and Goldman Sachs, predict that China could overtake the US as the No. 1 economy by 2025.