The Japanese Economic Output Declines as Overseas Sales Suffer by American Trade Duties
The Japanese economic system has experienced a decline for the first time in a year and a half, largely caused by weakening overseas shipments due to recent American tariffs.
G7 Growth Leaderboard
The Japanese economy has become the initial G7 economy to announce an economic contraction in the latest quarter.
With the United States still needing to publish its gross domestic product figures for the third quarter, the present G7 growth standings indicate:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: no growth
- Japan: negative 0.4 percent
Tourism Shares Slump amid Diplomatic Rift with China
In addition to the economic contraction, Japan is dealing with an intensifying political tension with China concerning Taiwan.
Shares in Japan's travel and consumer firms have fallen noticeably after China advised its citizens to avoid visiting to Japan.
This move by Beijing intensified a political dispute that was sparked by comments from Tokyo's recently appointed PM about the possibility of deploying forces in the event of a hypothetical Chinese attack on Taiwan.
The development caused a surge of sell-offs across Japanese leisure shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's travel warning advising against travel to Japan introduces near-term challenges for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly at risk."
GDP Contraction Details
Japan's GDP dropped by 0.4 percent in the third quarter, as industrial exports were impacted by duties imposed by the US this year.
Overseas shipments were a major factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15% when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3% compared to the previous quarter.
On an annual basis, Japan's GDP contracted by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that growth is halted for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The US administration has recently recognized the effect of tariffs on Americans, reducing tariffs on imported food products including meat, produce, coffee and bananas amid growing concerns about rising costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
