The Japanese Economy Declines as Overseas Sales Are Hit by US Trade Duties
The Japanese economic system has recorded a decline for the initial time in six quarters, mainly driven by falling exports as a result of newly imposed US tariffs.
Group of Seven Growth Rankings
Japan has become the initial G7 economy to report an output shrinkage in the most recent three-month period.
As the US yet to release its gross domestic product figures for the third quarter, the current Group of Seven economic standings show:
- The French economy: +0.5% expansion
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: negative 0.4 percent
Tourism Stocks Slump during Political Dispute with Beijing
In addition to the GDP decline, Japan is facing an escalating diplomatic tension with China concerning Taiwan.
Shares in Japan's tourism and consumer firms have dropped sharply after China urged its residents to refrain from visiting to Japan.
This move by Beijing intensified a political dispute that was sparked by remarks from Japan's new PM about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of selling across Japan's tourism-related stocks.
- The Tokyo Disneyland operator shares fell by 5.7 percent
- The department store chain tumbled by 11.3%
- The national carrier declined by 3.75%
"The China-Japan tension over Taiwan and Beijing's travel warning advising against travel to Japan brings near-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."
GDP Contraction Breakdown
Japan's gross domestic product fell by 0.4 percent in the third quarter, as industrial exports were hit by tariffs levied by the United States recently.
Exports were a key factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a new 25% tariff on its products, which was later lowered to 15% when the two nations concluded a trade agreement.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.
"Japan's economy was stable in the first half of this year and today's GDP data showed that growth is paused for now.
I anticipate Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently acknowledged the impact of tariffs on US consumers, reducing tariffs on imported food products including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.
Economic Agenda
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
