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Japan's Economy Shrinks while Overseas Sales Are Hit by US Trade Duties
Japan's economy has shown a drop for the initial time in a year and a half, largely driven by falling overseas shipments as a result of recent US trade duties.
Group of Seven Growth Leaderboard
Japan has become the first Group of Seven economy to announce an output shrinkage in the latest three-month period.
As the United States yet to release its GDP data for the third quarter, the present G7 growth standings display:
- France: 0.5 percent quarterly growth
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: no growth
- Japan: -0.4%
Tourism Stocks Slump amid Diplomatic Dispute with China
Alongside the GDP decline, Japan is experiencing an growing diplomatic conflict with China regarding Taiwan.
Stocks in Japanese travel and retail firms have fallen noticeably after China advised its residents to avoid visiting to Japan.
This action by Beijing escalated a political dispute that was sparked by remarks from Japan's recently appointed prime minister about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.
The development triggered a surge of selling across Japan's tourism-related stocks.
- Oriental Land shares fell by 5.7 percent
- The department store chain plummeted by 11.3%
- The national carrier fell by 3.75 percent
"The ongoing tension over Taiwan and China's travel warning advising against visits to Japan brings short-term difficulties for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services especially vulnerable."
Economic Decline Breakdown
Japanese GDP declined by 0.4% in the July-September quarter, as industrial exports were hit by tariffs imposed by the US this year.
Overseas shipments were a key driver of the decline, falling 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 new 25% tariff on its goods, which was later lowered to 15 percent when the two countries concluded a trade deal.
Private demand also fell, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's GDP contracted by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP data showed that growth is paused for now.
I anticipate Japan's economy to be back on a moderate recovery trend going forward."
The White House has recently recognized the impact of tariffs on Americans, reducing tariffs on food imports including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
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