The Japanese Economic Output Shrinks while Exports Face Impact by US Tariffs
The Japanese economic system has recorded a drop for the first time in a year and a half, largely caused by declining exports due to recent US trade duties.
Group of Seven Growth Standings
The Japanese economy has become the first Group of Seven country to announce an GDP decline in the previous three-month period.
With the US yet to publish its GDP figures for the third quarter, the present Group of Seven growth leaderboard show:
- The French economy: 0.5 percent expansion
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (provisional estimate)
- German economy: zero growth
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Slump amid Diplomatic Rift with China
Alongside the GDP decline, Japan is dealing with an growing political conflict with China regarding Taiwan.
Shares in Japan's travel and retail firms have fallen sharply after China advised its citizens to avoid traveling to Japan.
This decision by Chinese authorities heightened a diplomatic feud that was sparked by remarks from Japan's new prime minister about the possibility of deploying forces in the event of a potential Chinese invasion on Taiwan.
The development caused a wave of selling across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines fell by 3.75 percent
"The China-Japan dispute over Taiwan and China's advisory discouraging travel to Japan introduces short-term challenges for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly at risk."
Economic Contraction Details
Japanese GDP declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by duties levied by the United States recently.
Overseas shipments were a primary driver of the decline, dropping by 1.2 percent compared with the April-June 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 percent tariff on its products, which was later reduced to 15% when the two countries concluded a trade agreement.
Consumer spending also declined, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"Japan's economy was stable in the initial six months 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 US administration has recently acknowledged the impact of tariffs on Americans, reducing duties on food imports including meat, produce, beverages and bananas amid increasing concerns about rising costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
