The Japanese Economy Shrinks while Exports Are Hit by American Trade Duties
The Japanese economic system has recorded a decline for the first time in a year and a half, mainly driven by weakening overseas shipments as a result of newly imposed US tariffs.
G7 Economic Rankings
The Japanese economy has become the initial G7 economy to disclose an output shrinkage in the most recent three-month period.
With the United States still needing to release its gross domestic product data for the third quarter, the present Group of Seven growth standings display:
- France: 0.5 percent expansion
- UK: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Decline during Diplomatic Rift with China
In addition to the economic contraction, Japan is experiencing an escalating political tension with China concerning Taiwan.
Stocks in Japanese travel and retail firms have dropped significantly after China recommended its residents to avoid visiting to Japan.
This action by Beijing heightened a diplomatic feud that was initiated by remarks from Tokyo's new prime minister about the possibility of deploying forces in the event of a hypothetical Chinese attack on Taiwan.
The development led to a wave of selling across Japanese tourism-related stocks.
- Oriental Land shares dropped by 5.7%
- Isetan Mitsukoshi tumbled by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan brings near-term headwinds for consumer-facing sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."
Economic Contraction Details
Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by tariffs imposed by the United States this year.
Overseas shipments were a primary factor of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the American government had proposed Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two countries concluded a trade deal.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP 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 growth is halted temporarily.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The White House has recently acknowledged the impact of tariffs on US consumers, reducing duties on imported food products including beef, produce, coffee and bananas amid growing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
