Japan's Economic Output Contracts while Overseas Sales Face Impact by American Trade Duties
The Japanese economic system has shown a decline for the first time in a year and a half, primarily driven by falling overseas shipments because of newly imposed US tariffs.
G7 Growth Standings
Japan has become the initial G7 economy to disclose an output shrinkage in the previous quarter.
With the US still needing to publish its GDP figures for the third quarter, the current G7 growth leaderboard display:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump during Political Dispute with Beijing
Alongside the economic contraction, Japan is dealing with an escalating political conflict with China regarding Taiwan.
Stocks in Japanese tourism and retail businesses have fallen significantly after China advised its residents to refrain from traveling to Japan.
This move by Chinese authorities heightened a diplomatic feud that was initiated by remarks from Japan's recently appointed PM about the possibility of deploying forces in the event of a hypothetical Chinese invasion on Taiwan.
The development caused a wave of selling across Japanese tourism-related stocks.
- The Tokyo Disneyland operator shares dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- Japan Airlines declined by 3.75%
"The China-Japan dispute over Taiwan and Beijing's advisory advising against travel to Japan brings near-term difficulties for retail and hospitality sectors.
"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly at risk."
GDP Decline Details
Japanese GDP declined by 0.4 percent in the third quarter, as manufacturers' exports were hit by tariffs imposed by the United States recently.
Overseas shipments were a major driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had threatened Japan with a new 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% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"Japan's economy was stable in the first half of this year and today's GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately recognized the impact of tariffs on Americans, lowering tariffs on food imports including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.
Economic Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
