Japan's Economic Output Shrinks as Overseas Sales Face Impact by US Trade Duties
Japan's economy has recorded a contraction for the initial time in a year and a half, mainly caused by declining exports because of recent US tariffs.
Group of Seven Growth Standings
The Japanese economy has become the first Group of Seven nation to report an GDP decline in the latest three-month period.
With the US still needing to publish its GDP figures for the third quarter, the current G7 growth standings display:
- France: +0.5% expansion
- UK: +0.1%
- Canada: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japan: -0.4%
Travel Stocks Slump amid Diplomatic Rift with China
In addition to the economic contraction, Japan is dealing with an intensifying political dispute with China concerning Taiwan.
Stocks in Japan's tourism and consumer firms have dropped significantly after China recommended its citizens to refrain from traveling to Japan.
This move by Beijing escalated a diplomatic feud that was initiated by remarks from Japan's new PM about the possibility of sending troops in the event of a potential Chinese invasion on Taiwan.
The situation triggered a surge of selling across Japan's leisure shares.
- The Tokyo Disneyland operator shares dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines fell by 3.75%
"The China-Japan tension over Taiwan and China's advisory advising against travel to Japan brings near-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially vulnerable."
GDP Decline Breakdown
Japanese GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by tariffs levied by the US recently.
Exports were a key factor of the decline, dropping by 1.2% 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 threatened Japan with a new 25% tariff on its goods, which was later reduced to 15% when the two countries reached a trade deal.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the quarter through September.
"Japan's economy was solid in the first half of this year and today's GDP figures showed that growth is paused for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The White House has lately recognized the impact of tariffs on Americans, reducing duties on imported food products including meat, tomatoes, coffee and fruits amid increasing concerns about rising costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
