The Japanese Economic Output Declines while Exports Are Hit by US Tariffs
The Japanese economic system has recorded a drop for the initial time in a year and a half, largely driven by falling overseas shipments as a result of newly imposed American trade duties.
G7 Growth Leaderboard
Japan stands as the first G7 country to report an economic contraction in the latest quarter.
With the US still needing to publish its gross domestic product figures for the third quarter, the current G7 economic standings indicate:
- France: +0.5% expansion
- UK: +0.1%
- Canadian economy: +0.1% (provisional estimate)
- Germany: zero growth
- Italy: no growth
- Japanese economy: negative 0.4 percent
Tourism Stocks Slump during Political Rift with Beijing
Alongside the economic contraction, Japan is dealing with an growing political conflict with China regarding Taiwan.
Shares in Japan's tourism and consumer firms have dropped significantly after China advised its residents to avoid traveling to Japan.
This decision by Chinese authorities heightened a political dispute that was sparked by statements from Tokyo's new PM about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.
The situation caused a wave of sell-offs across Japanese leisure shares.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines declined by 3.75%
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term difficulties for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially at risk."
GDP Contraction Breakdown
Japan's GDP fell by 0.4 percent in the July-September quarter, as industrial overseas shipments were impacted by tariffs imposed by the US recently.
Overseas shipments were a key factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had proposed Japan with a new 25 percent tariff on its goods, which was later reduced to 15 percent when the two nations reached a trade deal.
Private demand also declined, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8% in the quarter through September.
"The Japanese economic situation was stable in the initial six months of this year and the latest GDP data showed that growth is paused for now.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on US consumers, lowering tariffs on imported food products including beef, produce, coffee and fruits amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
