The Japanese Economic Output Shrinks as Overseas Sales Are Hit by US Trade Duties
Japan's economy has shown a decline for the first time in six quarters, largely driven by weakening overseas shipments due to recent American tariffs.
G7 Growth Leaderboard
The Japanese economy stands as the initial G7 nation to disclose an economic contraction in the latest three-month period.
With the US still needing to release its gross domestic product figures for the third quarter, the current G7 economic standings indicate:
- The French economy: 0.5 percent quarterly growth
- UK: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italian economy: 0%
- Japanese economy: negative 0.4 percent
Tourism Shares Decline amid Political Dispute with Beijing
Alongside the economic contraction, Japan is experiencing an intensifying diplomatic dispute with China regarding Taiwan.
Stocks in Japanese travel and retail firms have fallen sharply after China advised its citizens to refrain from traveling to Japan.
This decision by Beijing escalated a diplomatic feud that was initiated by remarks from Tokyo's new PM about the possibility of sending forces in the case of a potential Chinese attack on Taiwan.
The situation caused a wave of selling across Japan's tourism-related shares.
- Oriental Land shares dropped by 5.7%
- The department store chain tumbled by 11.3%
- The national carrier declined by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning discouraging travel to Japan brings short-term challenges for consumer-facing sectors.
"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly vulnerable."
Economic Contraction Breakdown
Japan's gross domestic product fell by 0.4% in the third quarter, as industrial exports were affected by tariffs imposed by the US this year.
Exports were a primary factor of the decline, falling by 1.2 percent 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 proposed Japan with a new 25 percent tariff on its products, which was later reduced to 15% when the two nations reached a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"The Japanese economic situation was strong in the initial six months of this year and the latest GDP figures showed that momentum is paused for now.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately recognized the effect of tariffs on Americans, lowering duties on food imports including beef, produce, beverages and fruits amid increasing concerns about rising costs.
Business Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
