The Japanese Economic Output Declines as Exports Suffer by US Trade Duties
The Japanese economic system has shown a contraction for the first time in six quarters, primarily caused by declining exports due to recent American tariffs.
G7 Growth Rankings
Japan stands as the first G7 country to report an output shrinkage in the latest three-month period.
As the United States yet to release its gross domestic product figures for the third quarter, the current Group of Seven economic rankings display:
- France: +0.5% quarterly growth
- UK: +0.1%
- Canada: 0.1 percent (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Decline during Political Rift with China
Alongside the GDP decline, Japan is experiencing an escalating diplomatic conflict with China concerning Taiwan.
Stocks in Japan's travel and consumer firms have declined sharply after China advised its residents to avoid traveling to Japan.
This move by Chinese authorities intensified a diplomatic feud that was triggered by statements from Japan's recently appointed prime minister about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The development caused a wave of sell-offs across Japanese tourism-related stocks.
- Oriental Land shares fell by 5.7 percent
- The department store chain plummeted by 11.3 percent
- The national carrier fell by 3.75%
"The China-Japan dispute over Taiwan and Beijing's travel warning advising against visits to Japan introduces short-term headwinds for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services particularly vulnerable."
Economic Decline Details
Japan's GDP declined by 0.4% in the July-September quarter, as industrial overseas shipments were impacted by tariffs levied by the United States this year.
Overseas shipments were a major factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had proposed Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two nations reached a trade agreement.
Consumer spending also fell, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"The Japanese economic situation was solid in the first half of this year and today's GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be returning on a moderate growth trend going forward."
The US administration has lately acknowledged the effect of tariffs on Americans, lowering tariffs on food imports including beef, tomatoes, coffee and bananas amid increasing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
