Japan's Economic Output Contracts while Overseas Sales Suffer by US Trade Duties
Japan's economy has recorded a drop for the initial time in six quarters, mainly caused by weakening exports as a result of recent US tariffs.
G7 Economic Rankings
The Japanese economy stands as the initial G7 economy to announce an output shrinkage in the latest three-month period.
As the United States still needing to publish its gross domestic product figures for the third quarter, the present Group of Seven economic rankings show:
- France: +0.5% expansion
- UK: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump amid Diplomatic Dispute with China
In addition to the economic contraction, Japan is facing an growing political dispute with China regarding Taiwan.
Shares in Japan's travel and retail firms have declined noticeably after China urged its nationals to refrain from traveling to Japan.
This action by Chinese authorities intensified a political dispute that was initiated by comments from Tokyo's recently appointed PM about the potential of deploying forces in the event of a potential Chinese invasion on Taiwan.
The development triggered a wave of selling across Japan's leisure shares.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier fell by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory advising against visits to Japan creates near-term headwinds for retail and hospitality sectors.
"Tourists from China account for roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality especially at risk."
GDP Decline Details
Japanese GDP declined by 0.4 percent in the July-September quarter, as industrial overseas shipments were affected by tariffs imposed by the United States this year.
Exports were a primary driver of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.
"Japan's economy was solid in the first half of this year and the latest GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The White House has lately recognized the impact of tariffs on Americans, reducing tariffs on food imports including beef, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
