The Japanese Economy Declines while Exports Suffer by US Trade Duties
The Japanese economic system has shown a drop for the initial time in a year and a half, largely caused by declining overseas shipments due to newly imposed American tariffs.
G7 Growth Standings
The Japanese economy stands as the first Group of Seven economy to announce an economic contraction in the previous three-month period.
As the United States still needing to publish its gross domestic product figures for the third quarter, the present G7 growth leaderboard indicate:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: +0.1% (provisional estimate)
- German economy: zero growth
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Slump amid Political Rift with China
Alongside the economic contraction, Japan is dealing with an growing diplomatic dispute with China concerning Taiwan.
Stocks in Japan's tourism and retail businesses have dropped noticeably after China recommended its residents to avoid traveling to Japan.
This decision by Chinese authorities intensified a diplomatic feud that was sparked by comments from Tokyo's recently appointed prime minister about the potential of sending forces in the case of a potential Chinese attack on Taiwan.
The development led to a wave of selling across Japanese leisure shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier declined by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's advisory advising against visits to Japan brings near-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."
GDP Contraction Details
Japan's gross domestic product dropped by 0.4 percent in the third quarter, as manufacturers' exports were impacted by tariffs imposed by the US this year.
Overseas shipments were a primary factor of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Previously, the American government had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15% when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank 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 momentum is paused temporarily.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, lowering duties on imported food products including beef, produce, coffee and bananas amid increasing concerns about increasing costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
