Japan's Economic Output Contracts while Exports Suffer by US Tariffs
Japan's economy has recorded a decline for the initial time in six quarters, primarily caused by falling overseas shipments due to recent American tariffs.
G7 Economic Leaderboard
Japan has become the first Group of Seven country to disclose an GDP decline in the latest quarter.
As the United States yet to release its gross domestic product figures for the third quarter, the present G7 economic rankings display:
- France: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump during Political Rift with China
In addition to the GDP decline, Japan is facing an escalating diplomatic tension with China regarding Taiwan.
Stocks in Japan's tourism and consumer firms have declined sharply after China urged its residents to avoid visiting to Japan.
This action by Chinese authorities heightened a diplomatic feud that was sparked by remarks from Tokyo's recently appointed PM about the possibility of sending troops in the event of a potential Chinese invasion on Taiwan.
The situation led to a wave of sell-offs across Japanese leisure stocks.
- Oriental Land shares dropped by 5.7 percent
- The department store chain plummeted by 11.3 percent
- The national carrier declined by 3.75%
"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan introduces 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 especially vulnerable."
Economic Contraction Breakdown
Japan's GDP declined by 0.4% in the third quarter, as industrial overseas shipments were affected by duties levied by the United States recently.
Exports were a major factor of the contraction, falling 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 new 25 percent tariff on its goods, which was later reduced to 15% when the two countries concluded a trade deal.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP figures showed that momentum is halted temporarily.
I anticipate Japan's economy to be returning on a moderate recovery trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, lowering tariffs on food imports including beef, produce, beverages 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
