The Japanese Economy Contracts while Overseas Sales Face Impact by American Tariffs
Japan's economy has experienced a drop for the initial time in a year and a half, mainly caused by declining exports because of recent US trade duties.
Group of Seven Economic Leaderboard
The Japanese economy stands as the first Group of Seven economy to announce an output shrinkage in the most recent quarter.
As the US still needing to publish its GDP data for the third quarter, the current G7 economic rankings display:
- France: +0.5% expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: -0.4%
Tourism Stocks Slump amid Political Dispute with Beijing
Alongside the GDP decline, Japan is dealing with an growing political dispute with China regarding Taiwan.
Shares in Japanese travel and consumer firms have declined significantly after China recommended its residents to refrain from visiting to Japan.
This decision by Chinese authorities heightened a diplomatic feud that was sparked by remarks from Japan's new PM about the potential of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation triggered a surge of selling across Japan's tourism-related stocks.
- Oriental Land shares fell by 5.7%
- The department store chain plummeted by 11.3%
- The national carrier declined by 3.75 percent
"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan brings near-term difficulties for consumer-facing sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, luxury retail, and hospitality especially vulnerable."
Economic Decline Details
Japanese gross domestic product fell by 0.4 percent in the third quarter, as manufacturers' overseas shipments were affected by tariffs imposed by the US recently.
Exports were a key factor of the contraction, dropping by 1.2% 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 new 25% tariff on its products, which was later reduced to 15% when the two nations concluded a trade deal.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that growth is paused temporarily.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The White House has lately recognized the impact of tariffs on Americans, lowering duties on food imports including beef, produce, coffee and fruits amid growing concerns about increasing costs.
Business Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
