The Japanese Economic Output Declines while Overseas Sales Face Impact by American Trade Duties
The Japanese economic system has recorded a contraction for the initial time in six quarters, primarily caused by declining exports due to recent US trade duties.
G7 Growth Rankings
The Japanese economy stands as the first Group of Seven nation to disclose an economic contraction in the previous quarter.
With the United States yet to release its GDP data for the third quarter, the current Group of Seven growth leaderboard indicate:
- France: +0.5% expansion
- UK: +0.1%
- Canadian economy: +0.1% (provisional estimate)
- Germany: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Travel Shares Decline amid Political Dispute with China
Alongside the economic contraction, Japan is facing an growing diplomatic tension with China regarding Taiwan.
Shares in Japanese tourism and retail firms have dropped sharply after China urged its nationals to refrain from visiting to Japan.
This move by Beijing escalated a political dispute that was sparked by remarks from Tokyo's recently appointed prime minister about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation led to 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 fell by 3.75%
"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan introduces short-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially vulnerable."
GDP Decline Breakdown
Japan's gross domestic product dropped by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted by duties levied by the United States recently.
Exports were a key driver 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 US administration had proposed Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two nations reached a trade agreement.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"Japan's economy was strong in the first half of this year and today's GDP figures showed that momentum is halted for now.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently recognized the impact of tariffs on Americans, lowering duties on imported food products including beef, tomatoes, coffee and fruits amid growing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
