Japan's Economy Contracts while Overseas Sales Are Hit by American Tariffs
The Japanese economic system has shown a decline for the first time in a year and a half, mainly caused by weakening overseas shipments because of recent American trade duties.
Group of Seven Economic Standings
Japan has become the initial G7 country to disclose an output shrinkage in the most recent three-month period.
With the US still needing to publish its GDP figures for the third quarter, the current G7 growth rankings indicate:
- The French economy: +0.5% expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italian economy: 0%
- Japanese economy: negative 0.4 percent
Travel Shares Decline amid Political Dispute with Beijing
In addition to the GDP decline, Japan is experiencing an intensifying political tension with China concerning Taiwan.
Stocks in Japan's travel and consumer companies have fallen noticeably after China advised its nationals to avoid traveling to Japan.
This action by Beijing heightened a political dispute that was sparked by statements from Tokyo's recently appointed prime minister about the possibility of sending forces in the event of a potential Chinese attack on Taiwan.
The situation caused a surge of sell-offs across Japanese leisure shares.
- The Tokyo Disneyland operator shares fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier declined by 3.75%
"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan introduces short-term headwinds for retail and hospitality sectors.
"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services especially vulnerable."
Economic Decline Breakdown
Japanese gross domestic product dropped by 0.4% in the third quarter, as manufacturers' exports were affected by duties levied by the United States recently.
Exports were a primary driver of the decline, 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 proposed Japan with a new 25% tariff on its products, which was later lowered to 15% when the two nations reached a trade deal.
Consumer spending also declined, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP data showed that growth is paused for now.
I anticipate Japan's economy to be back on a moderate growth trend going forward."
The White House has recently recognized the effect of tariffs on Americans, reducing duties on food imports including meat, produce, coffee and fruits amid growing concerns about rising costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
