Japan's Economy Shrinks while Exports Suffer by US Tariffs
The Japanese economic system has shown a drop for the first time in six quarters, mainly caused by falling exports as a result of newly imposed American trade duties.
Group of Seven Growth Standings
The Japanese economy has become the initial G7 economy to disclose an economic contraction in the most recent quarter.
With the US still needing to publish its gross domestic product figures for the third quarter, the present G7 economic leaderboard display:
- The French economy: +0.5% quarterly growth
- UK: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: no growth
- Japanese economy: negative 0.4 percent
Tourism Stocks Decline during Political Dispute with China
Alongside the GDP decline, Japan is facing an intensifying political dispute with China regarding Taiwan.
Shares in Japan's travel and retail companies have declined significantly after China advised its citizens to refrain from traveling to Japan.
This action by Chinese authorities intensified a political dispute that was initiated by remarks from Japan's recently appointed PM about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation caused a surge of sell-offs across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- The department store chain plummeted by 11.3%
- Japan Airlines declined by 3.75%
"The ongoing tension over Taiwan and China's travel warning discouraging visits to Japan creates short-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."
Economic Contraction Details
Japanese gross domestic product dropped by 0.4% in the third quarter, as industrial overseas shipments were impacted by tariffs levied by the United States this year.
Overseas shipments were a primary factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade deal.
Private demand also declined, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"Japan's economy was stable in the first half of this year and today's GDP data showed that growth is paused for now.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately recognized the effect of tariffs on Americans, lowering duties on food imports including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August