The Japanese Economy Shrinks while Overseas Sales Are Hit by US Tariffs
The Japanese economic system has recorded a decline for the initial time in six quarters, largely caused by falling overseas shipments as a result of newly imposed American tariffs.
Group of Seven Economic Leaderboard
Japan stands as the initial Group of Seven economy to report an GDP decline in the latest three-month period.
As the United States yet to release its gross domestic product figures for the third quarter, the current G7 growth rankings show:
- France: 0.5 percent quarterly growth
- UK: 0.1 percent
- Canada: +0.1% (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japanese economy: -0.4%
Travel Shares Decline during Diplomatic Rift with Beijing
In addition to the economic contraction, Japan is dealing with an escalating diplomatic conflict with China concerning Taiwan.
Stocks in Japanese travel and consumer firms have declined significantly after China urged its residents to avoid traveling to Japan.
This decision by Chinese authorities escalated a political dispute that was triggered by statements from Tokyo's recently appointed PM about the possibility of sending troops in the case of a hypothetical Chinese attack on Taiwan.
The situation caused a surge of sell-offs across Japanese leisure stocks.
- Oriental Land shares dropped by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan introduces short-term challenges for consumer-facing sectors.
"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially vulnerable."
Economic Decline Details
Japan's GDP dropped by 0.4 percent in the July-September quarter, as industrial exports were impacted by duties levied by the United States recently.
Overseas shipments were a primary factor of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two nations reached a trade agreement.
Consumer spending also declined, by 0.3% quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the quarter through September.
"The Japanese economic situation was stable in the initial six months of this year and today's GDP data showed that momentum is paused for now.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The US administration has lately acknowledged the effect of tariffs on Americans, reducing tariffs on imported food products including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
