Japan's Economy Declines as Exports Are Hit by American Trade Duties
The Japanese economic system has shown a drop for the first time in six quarters, primarily caused by declining exports due to recent American tariffs.
Group of Seven Economic Leaderboard
Japan has become the initial Group of Seven economy to disclose an economic contraction in the latest quarter.
With the US still needing to release its GDP data for the third quarter, the current Group of Seven growth leaderboard indicate:
- France: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (provisional estimate)
- Germany: 0%
- Italy: no growth
- Japan: -0.4%
Tourism Shares Decline during Diplomatic Dispute with China
Alongside the GDP decline, Japan is experiencing an growing political conflict with China regarding Taiwan.
Shares in Japanese travel and retail businesses have dropped significantly after China urged its nationals to refrain from visiting to Japan.
This move by Chinese authorities heightened a political dispute that was triggered by remarks from Tokyo's new PM about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of sell-offs across Japan's leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan introduces near-term difficulties for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly vulnerable."
Economic Contraction Breakdown
Japanese GDP dropped by 0.4% in the July-September quarter, as industrial exports were hit by duties imposed by the US recently.
Overseas shipments were a key driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.
Previously, the American government had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade deal.
Consumer spending also declined, 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 three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP data showed that growth is halted temporarily.
I expect Japan's economy to be back on a gradual growth trend going forward."
The White House has lately recognized the impact of tariffs on US consumers, lowering duties on food imports including meat, produce, beverages and bananas amid growing concerns about increasing costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
