The Japanese Economic Output Contracts as Exports Face Impact by US Trade Duties
The Japanese economic system has experienced a contraction for the first time in six quarters, mainly caused by declining exports as a result of newly imposed American tariffs.
G7 Economic Standings
The Japanese economy stands as the initial G7 country to report an output shrinkage in the previous three-month period.
As the US still needing to publish its gross domestic product data for the third quarter, the present Group of Seven growth rankings show:
- France: +0.5% expansion
- UK: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: no growth
- Japan: negative 0.4 percent
Travel Stocks Slump during Diplomatic Dispute with China
In addition to the GDP decline, Japan is dealing with an escalating political tension with China concerning Taiwan.
Stocks in Japan's travel and consumer firms have fallen sharply after China urged its nationals to refrain from visiting to Japan.
This move by Beijing intensified a diplomatic feud that was triggered by remarks from Tokyo's new prime minister about the potential of sending forces in the event of a potential Chinese invasion on Taiwan.
The situation led to a wave of selling across Japanese tourism-related shares.
- Oriental Land stock fell by 5.7%
- Isetan Mitsukoshi tumbled by 11.3 percent
- Japan Airlines fell by 3.75%
"The ongoing tension over Taiwan and Beijing's travel warning advising against travel to Japan introduces short-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially at risk."
Economic Contraction Breakdown
Japan's gross domestic product dropped by 0.4% in the third quarter, as industrial exports were hit by duties levied by the US this year.
Overseas shipments were a key factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.
Earlier this year, the American government had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15% when the two countries reached a trade agreement.
Consumer spending also declined, by 0.3% compared to the previous quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that growth is paused temporarily.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The US administration has recently acknowledged the effect of tariffs on Americans, lowering tariffs on imported food products including beef, tomatoes, coffee and fruits amid increasing concerns about increasing costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August