Japan's Economy Declines as Exports Face Impact by American Tariffs
Japan's economy has recorded a contraction for the first time in a year and a half, largely caused by weakening exports because of recent American trade duties.
Group of Seven Economic Leaderboard
Japan stands as the first G7 nation to announce an GDP decline in the most recent three-month period.
With the United States still needing to publish its gross domestic product figures for the third quarter, the current Group of Seven economic leaderboard display:
- The French economy: 0.5 percent quarterly growth
- UK: +0.1%
- Canada: +0.1% (provisional estimate)
- Germany: zero growth
- Italian economy: 0%
- Japanese economy: -0.4%
Travel Stocks Slump during Political Dispute with Beijing
In addition to the economic contraction, Japan is dealing with an intensifying political dispute with China regarding Taiwan.
Stocks in Japan's tourism and retail firms have declined noticeably after China urged its nationals to avoid visiting to Japan.
This decision by Chinese authorities escalated a diplomatic feud that was sparked by comments from Japan's recently appointed PM about the potential of deploying troops in the case of a hypothetical Chinese invasion on Taiwan.
The development led to a surge of selling across Japan's tourism-related shares.
- Oriental Land stock dropped by 5.7%
- The department store chain plummeted by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan creates near-term difficulties for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially at risk."
Economic Decline Breakdown
Japan's GDP declined by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by tariffs levied by the US this year.
Overseas shipments were a primary factor 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 US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15% when the two countries reached a trade agreement.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"The Japanese economic situation was stable in the initial six months of this year and today's GDP data showed that momentum is halted for now.
I anticipate Japan's economy to be back on a moderate growth trend going forward."
The US administration has recently recognized the impact of tariffs on US consumers, lowering duties on imported food products including beef, produce, beverages and fruits amid increasing concerns about rising costs.
Economic Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
