Japan's Economy Contracts while Exports Suffer by American Trade Duties
The Japanese economic system has shown a decline for the initial time in a year and a half, mainly driven by declining overseas shipments because of newly imposed American tariffs.
Group of Seven Economic Standings
Japan has become the initial G7 nation to disclose an economic contraction in the latest quarter.
As the United States still needing to release its GDP figures for the third quarter, the current G7 growth standings show:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canada: +0.1% (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japan: -0.4%
Tourism Shares Decline amid Diplomatic Dispute with China
Alongside the economic contraction, Japan is experiencing an intensifying diplomatic tension with China regarding Taiwan.
Shares in Japan's travel and consumer firms have dropped noticeably after China urged its residents to avoid visiting to Japan.
This move by Beijing intensified a political dispute that was sparked by comments from Japan's recently appointed PM about the potential of sending troops in the event of a hypothetical Chinese invasion on Taiwan.
The situation led to a wave of sell-offs across Japanese tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- The department store chain tumbled by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's advisory discouraging visits to Japan creates near-term challenges for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially vulnerable."
GDP Decline Breakdown
Japan's GDP declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by tariffs levied by the US this year.
Overseas shipments were a primary driver of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had threatened Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two countries concluded a trade agreement.
Consumer spending also declined, by 0.3% compared to the previous quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.
"The Japanese economic situation was solid in the first half of this year and today's GDP figures showed that growth is paused for now.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, reducing tariffs on imported food products including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Business Calendar
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
