Japan's Economy Shrinks while Overseas Sales Suffer by US Tariffs
The Japanese economic system has shown a drop for the initial time in six quarters, largely caused by weakening overseas shipments as a result of recent US trade duties.
Group of Seven Growth Rankings
The Japanese economy stands as the initial Group of Seven country to disclose an economic contraction in the most recent quarter.
With the United States still needing to release its GDP data for the third quarter, the current G7 economic rankings indicate:
- France: 0.5 percent quarterly growth
- UK: 0.1 percent
- Canadian economy: +0.1% (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japanese economy: -0.4%
Travel Stocks Decline amid Political Rift with China
In addition to the GDP decline, Japan is experiencing an growing political dispute with China regarding Taiwan.
Shares in Japan's travel and retail businesses have declined sharply after China recommended its citizens to refrain from traveling to Japan.
This action by Chinese authorities escalated a diplomatic feud that was initiated by remarks from Tokyo's recently appointed PM about the possibility of deploying troops in the event of a potential Chinese attack on Taiwan.
The situation triggered a wave of selling across Japan's tourism-related shares.
- Oriental Land stock dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier declined by 3.75 percent
"The ongoing dispute over Taiwan and Beijing's travel warning advising against visits to Japan introduces short-term challenges for consumer-facing sectors.
"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."
GDP Contraction Breakdown
Japanese GDP fell by 0.4% in the third quarter, as manufacturers' exports were hit by duties levied by the United States recently.
Overseas shipments were a major driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the American government had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two nations concluded a trade agreement.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"Japan's economy was strong in the first half of this year and the latest GDP data showed that growth is halted for now.
I expect Japan's economy to be back on a moderate growth trend going forward."
The White House has lately acknowledged the effect of tariffs on Americans, reducing duties on food imports including meat, produce, beverages and bananas amid growing concerns about increasing costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
