The Japanese Economic Output Contracts while Exports Suffer by American Trade Duties
The Japanese economic system has experienced a decline for the first time in six quarters, primarily driven by falling overseas shipments due to newly imposed American trade duties.
G7 Economic Rankings
The Japanese economy has become the first G7 economy to announce an output shrinkage in the most recent three-month period.
With the United States still needing to release its gross domestic product figures for the third quarter, the present G7 economic leaderboard indicate:
- The French economy: +0.5% expansion
- UK: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- Germany: 0%
- Italy: no growth
- Japanese economy: -0.4%
Travel Shares Decline amid Political Rift with China
In addition to the GDP decline, Japan is dealing with an escalating diplomatic conflict with China regarding Taiwan.
Shares in Japan's travel and retail companies have fallen noticeably after China recommended its citizens to refrain from visiting to Japan.
This action by Chinese authorities heightened a political dispute that was sparked by remarks from Japan's new prime minister about the possibility of deploying troops in the event of a potential Chinese invasion on Taiwan.
The situation led to a surge of selling across Japan's tourism-related stocks.
- The Tokyo Disneyland operator stock dropped by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier declined by 3.75 percent
"The China-Japan tension over Taiwan and China's advisory discouraging travel to Japan introduces short-term difficulties for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly at risk."
GDP Contraction Breakdown
Japan's GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were affected by duties levied by the United States this year.
Exports were a primary factor of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Previously, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15% when the two countries reached a trade deal.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"Japan's economy was stable in the initial six months of this year and the latest GDP figures showed that growth is paused temporarily.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on Americans, lowering tariffs on food imports including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
