Japan's Economy Shrinks as Overseas Sales Suffer by US Trade Duties
The Japanese economic system has recorded a contraction for the first time in six quarters, mainly driven by weakening overseas shipments as a result of newly imposed US trade duties.
G7 Growth Rankings
The Japanese economy has become the initial G7 nation to announce an GDP decline in the latest quarter.
With the United States still needing to release its GDP figures for the third quarter, the present G7 growth standings show:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Decline amid Diplomatic Rift with China
In addition to the GDP decline, Japan is facing an intensifying political conflict with China concerning Taiwan.
Stocks in Japan's tourism and consumer firms have declined significantly after China urged its citizens to avoid visiting to Japan.
This move by Chinese authorities escalated a political dispute that was triggered by statements from Tokyo's recently appointed prime minister about the potential of sending troops in the case of a hypothetical Chinese attack on Taiwan.
The situation triggered a surge of selling across Japan's tourism-related stocks.
- The Tokyo Disneyland operator shares dropped by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning advising against travel to Japan brings near-term challenges for retail and hospitality sectors.
"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially at risk."
Economic Decline Details
Japan's GDP declined by 0.4% in the July-September quarter, as industrial exports were affected by duties imposed by the United States recently.
Exports were a primary factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Previously, the American government had threatened Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two countries reached a trade deal.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that momentum is halted for now.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has lately recognized the effect of tariffs on Americans, reducing duties on food imports including meat, produce, beverages and fruits amid growing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
