Japan's Economy Shrinks as Exports Suffer by US Tariffs
The Japanese economic system has shown a decline for the initial time in six quarters, mainly caused by falling overseas shipments due to recent US trade duties.
Group of Seven Growth Rankings
The Japanese economy has become the first G7 country to disclose an GDP decline in the previous quarter.
As the US yet to release its GDP figures for the third quarter, the current G7 economic rankings show:
- France: +0.5% expansion
- United Kingdom: 0.1 percent
- Canada: +0.1% (preliminary figure)
- German economy: 0%
- Italian economy: no growth
- Japan: -0.4%
Travel Shares Slump during Political Dispute with China
Alongside the economic contraction, Japan is facing an escalating diplomatic conflict with China concerning Taiwan.
Shares in Japan's travel and retail companies have dropped sharply after China recommended its citizens to refrain from visiting to Japan.
This action by Chinese authorities intensified a diplomatic feud that was initiated by comments from Japan's recently appointed PM about the possibility of deploying forces in the event of a potential Chinese invasion on Taiwan.
The development triggered a wave of selling across Japanese tourism-related stocks.
- Oriental Land shares fell by 5.7%
- The department store chain plummeted by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's travel warning discouraging visits to Japan brings near-term challenges for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."
GDP Contraction Details
Japanese GDP fell by 0.4% in the July-September quarter, as industrial exports were affected by duties levied by the United States recently.
Overseas shipments were a key factor of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Previously, the American government had proposed Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two countries concluded a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"Japan's economy was solid in the initial six months of this year and today's GDP data showed that growth is halted temporarily.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The US administration has recently acknowledged the effect of tariffs on Americans, reducing duties on food imports including beef, produce, coffee and bananas amid growing concerns about increasing costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
