Japan's Economy Contracts while Overseas Sales Are Hit by US Tariffs
Japan's economy has experienced a decline for the first time in six quarters, largely caused by falling overseas shipments because of recent American trade duties.
Group of Seven Economic Standings
Japan stands as the initial G7 country to disclose an GDP decline in the most recent three-month period.
As the US yet to release its gross domestic product data for the third quarter, the present G7 economic leaderboard display:
- France: 0.5 percent quarterly growth
- UK: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japan: -0.4%
Travel Stocks Decline amid Diplomatic Dispute with Beijing
Alongside the economic contraction, Japan is experiencing an intensifying political conflict with China regarding Taiwan.
Stocks in Japan's tourism and retail companies have declined sharply after China urged its residents to avoid visiting to Japan.
This move by Chinese authorities heightened a diplomatic feud that was initiated by statements from Tokyo's recently appointed prime minister about the possibility of sending troops in the event of a potential Chinese invasion on Taiwan.
The development triggered a wave of sell-offs across Japanese leisure stocks.
- Oriental Land stock fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines fell by 3.75%
"The China-Japan dispute over Taiwan and China's advisory advising against travel to Japan brings short-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and hospitality especially at risk."
GDP Contraction Details
Japanese GDP declined by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by duties imposed by the US this year.
Overseas shipments were a primary factor of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two nations reached a trade deal.
Private demand also fell, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"Japan's economy was solid in the first half of this year and the latest GDP figures showed that growth is paused for now.
I anticipate 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, reducing duties on food imports including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Economic Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
