Japan's Economic Output Shrinks while Overseas Sales Are Hit by American Trade Duties
The Japanese economic system has shown a drop for the initial time in six quarters, mainly driven by weakening exports because of newly imposed American tariffs.
G7 Growth Rankings
Japan stands as the initial Group of Seven country to disclose an output shrinkage in the previous three-month period.
With the United States yet to release its GDP data for the third quarter, the present G7 economic standings display:
- France: +0.5% expansion
- United Kingdom: 0.1 percent
- Canada: 0.1 percent (provisional estimate)
- German economy: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Travel Shares Slump amid Political Dispute with Beijing
In addition to the economic contraction, Japan is experiencing an escalating political dispute with China concerning Taiwan.
Shares in Japanese travel and retail firms have fallen sharply after China recommended its residents to avoid traveling to Japan.
This action by Beijing escalated a political dispute that was triggered by remarks from Tokyo's recently appointed PM about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.
The development led to a surge of sell-offs across Japan's leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- The department store chain tumbled by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The ongoing tension over Taiwan and Beijing's advisory advising against travel to Japan brings near-term headwinds for consumer-facing sectors.
"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially vulnerable."
Economic Contraction Breakdown
Japanese GDP declined by 0.4% in the July-September quarter, as industrial exports were impacted by tariffs imposed by the US this year.
Exports were a primary factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the American government had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two nations concluded a trade deal.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"Japan's economy was stable in the initial six months of this year and the latest GDP figures showed that growth is halted for now.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The White House has recently acknowledged the effect of tariffs on Americans, lowering tariffs on imported food products including beef, produce, beverages and bananas amid increasing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
