The Japanese Economic Output Declines as Overseas Sales Suffer by American Trade Duties
Japan's economy has shown a drop for the initial time in six quarters, mainly driven by declining exports because of recent American trade duties.
G7 Growth Standings
Japan stands as the first G7 economy to announce an output shrinkage 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 present G7 growth rankings show:
- France: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Travel Shares Decline amid Diplomatic Rift with China
In addition to the economic contraction, Japan is dealing with an growing political tension with China regarding Taiwan.
Shares in Japanese travel and retail businesses have declined noticeably after China advised its citizens to avoid visiting to Japan.
This decision by Beijing intensified a political dispute that was sparked by comments from Japan's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation triggered a wave of selling across Japanese tourism-related shares.
- Oriental Land shares fell by 5.7%
- The department store chain tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan dispute over Taiwan and Beijing's advisory discouraging visits to Japan brings near-term challenges for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality particularly vulnerable."
Economic Contraction Breakdown
Japan's gross domestic product dropped by 0.4% in the third quarter, as industrial exports were impacted by tariffs imposed by the US this year.
Overseas shipments were a key factor of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent when the two countries 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 momentum is paused for now.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The US administration has lately recognized the impact of tariffs on Americans, reducing duties on food imports including beef, tomatoes, beverages and bananas amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
