Japan's Economy Contracts as Overseas Sales Face Impact by American Tariffs
Japan's economy has shown a drop for the initial time in six quarters, mainly caused by declining overseas shipments as a result of recent American tariffs.
Group of Seven Economic Standings
Japan has become the first G7 economy to report an output shrinkage in the latest quarter.
As the United States still needing to publish its gross domestic product figures for the third quarter, the present Group of Seven economic leaderboard display:
- France: +0.5% expansion
- UK: +0.1%
- Canada: +0.1% (provisional estimate)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Tourism Shares Slump during Diplomatic Rift with Beijing
Alongside the economic contraction, Japan is facing an intensifying political dispute with China concerning Taiwan.
Stocks in Japan's tourism and retail companies have fallen noticeably after China advised its citizens to avoid traveling to Japan.
This decision by Chinese authorities heightened a diplomatic feud that was initiated by comments from Japan's recently appointed PM about the possibility of deploying troops in the case of a potential Chinese attack on Taiwan.
The development caused a wave of selling across Japan's leisure shares.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain tumbled by 11.3 percent
- Japan Airlines declined by 3.75%
"The ongoing tension over Taiwan and Beijing's travel warning discouraging visits to Japan introduces short-term challenges for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially at risk."
GDP Decline Details
Japan's gross domestic product fell by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by duties levied by the US this year.
Overseas shipments were a key driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a new 25 percent tariff on its products, which was later lowered to 15 percent when the two countries concluded a trade deal.
Private demand also declined, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum 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 impact of tariffs on Americans, reducing tariffs on food imports including beef, tomatoes, coffee and bananas amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
