The Japanese Economic Output Contracts while Overseas Sales Face Impact by American Trade Duties
The Japanese economic system has shown a decline for the first time in six quarters, primarily caused by falling overseas shipments as a result of newly imposed American tariffs.
G7 Economic Standings
The Japanese economy has become the initial G7 nation to announce an GDP decline in the latest quarter.
With the United States still needing to release its GDP figures for the third quarter, the present G7 growth rankings show:
- France: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: 0.1 percent (provisional estimate)
- German economy: zero growth
- Italy: 0%
- Japan: negative 0.4 percent
Travel Stocks Slump during Political Rift with Beijing
In addition to the economic contraction, Japan is facing an intensifying political tension with China regarding Taiwan.
Stocks in Japan's travel and consumer firms have dropped significantly after China urged its residents to avoid traveling to Japan.
This decision by Beijing heightened a diplomatic feud that was initiated by statements from Japan's new prime minister about the potential of deploying troops in the event of a potential Chinese attack on Taiwan.
The development caused a wave of sell-offs across Japan's leisure stocks.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines fell by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory discouraging visits to Japan brings near-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality especially vulnerable."
GDP Decline Details
Japan's GDP dropped by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties levied by the US recently.
Overseas shipments were a major factor of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.
Earlier this year, 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 concluded a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"The Japanese economic situation was stable in the initial six months of this year and the latest GDP data showed that growth is halted for now.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has lately recognized the effect of tariffs on Americans, lowering duties on food imports including beef, tomatoes, coffee and bananas amid increasing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
