Lower global growth rates and rising energy and commodity costs are taking their toll on the Japan, which the IMF forecasts will grow in 2008 at its slowest rate in five years.

However, the Financial Times reports that the country’s export links to emerging markets are likely to shield it from the worst effects of the global recession:

Exports, which have been a big driver of growth in Japan’s economic recovery, have been surprisingly resilient in the face of a slowdown in the US, one of its main trading partners, thanks to demand from China, the Middle East and other emerging regions.

The IMF supported the Bank of Japan’s recent decisions to keep interest rates on hold in the face of a slowing economy, and praised the bank for its ‘flexible’ approach to meeting liquidity needs in the money markets.

“Concentrate on Japanese companies that are already working closely with China,” says Keith Fitz-Gerald in Money Morning. “The companies in this category firmly understand the regional dynamics at play today. But, more importantly, they understand just what the future is going to look like, and are already preparing for business dealings with China – and the Chinese consumer.

“Some great choices if you want to cash in include solar-ceramics maker Kyocera Corp. (ADR: KYO), trading giant and independent power plant developer Mitsui & Co. Ltd. (ADR: MITSY), and even Toyota Motor Co. (ADR: TM), which is now the world’s No. 1 automaker, and (as Money Morning just reported) also has branched out into commercial jetliners.”

Martin Hutchinson, also in Money Morning, says: “There are two categories of beneficiaries from a trading relationship between China and Japan that’s closer and more-barrier free. The first group consists chiefly of Japanese high-tech companies that are able to take advantage of China’s lower labor costs and more-profitably attack the world markets.

“The second group consists of low-cost, China-based manufacturing companies that can sell to Japan as a particularly juicy nearby market with similar cultural and taste characteristics – unlike the unfamiliar west.

“Both types of companies are likely to be big long-term winners from this trend.”