Japan's Economy Contracts as Overseas Sales Suffer by US Tariffs
Japan's economy has shown a contraction for the first time in six quarters, largely driven by declining overseas shipments as a result of newly imposed US trade duties.
G7 Economic Leaderboard
Japan has become the first Group of Seven economy to disclose an economic contraction in the latest three-month period.
With the United States yet to publish its GDP data for the third quarter, the present Group of Seven economic standings display:
- France: +0.5% expansion
- United Kingdom: +0.1%
- Canada: +0.1% (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Decline during Diplomatic Rift with China
Alongside the economic contraction, Japan is experiencing an growing political tension with China concerning Taiwan.
Stocks in Japan's travel and consumer firms have fallen significantly after China urged its nationals to refrain from traveling to Japan.
This action by Chinese authorities intensified a diplomatic feud that was sparked by statements from Tokyo's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The development caused a wave of sell-offs across Japan's tourism-related shares.
- Oriental Land stock fell by 5.7%
- The department store chain plummeted by 11.3%
- Japan Airlines declined by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory advising against visits to Japan brings short-term headwinds for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."
GDP Decline Breakdown
Japanese GDP declined by 0.4% in the July-September quarter, as industrial exports were hit by tariffs levied by the US recently.
Exports were a major factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.
Previously, the US administration had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two nations reached a trade deal.
Consumer spending also declined, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that momentum is paused temporarily.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately acknowledged the impact of tariffs on US consumers, reducing tariffs on imported food products including beef, produce, coffee and bananas amid growing concerns about rising costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
