The Japanese Economy Declines as Overseas Sales Suffer by American Trade Duties
Japan's economy has experienced a decline for the first time in six quarters, primarily caused by falling overseas shipments because of newly imposed American tariffs.
Group of Seven Growth Leaderboard
Japan has become the initial G7 nation to announce an output shrinkage in the latest quarter.
With the US yet to release its GDP data for the third quarter, the present G7 growth leaderboard show:
- The French economy: +0.5% expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Travel Shares Slump amid Political Dispute with Beijing
Alongside the economic contraction, Japan is dealing with an escalating diplomatic tension with China concerning Taiwan.
Stocks in Japan's tourism and consumer businesses have dropped noticeably after China advised its nationals to avoid traveling to Japan.
This action by Chinese authorities escalated a diplomatic feud that was initiated by remarks from Japan's recently appointed PM about the potential of sending forces in the event of a potential Chinese invasion on Taiwan.
The development triggered a surge of sell-offs across Japan's tourism-related shares.
- Oriental Land stock dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan creates short-term difficulties for retail and hospitality sectors.
"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly vulnerable."
Economic Decline Details
Japan's gross domestic product dropped by 0.4 percent in the third quarter, as manufacturers' exports were hit by tariffs imposed by the US recently.
Overseas shipments were a key driver of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade agreement.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP data showed that growth is halted for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The US administration has lately acknowledged the effect of tariffs on US consumers, reducing duties on food imports including beef, tomatoes, coffee and fruits amid increasing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
