Japan's Economy Contracts as Exports Suffer by US Trade Duties
The Japanese economic system has shown a drop for the initial time in six quarters, largely caused by weakening overseas shipments as a result of newly imposed American trade duties.
Group of Seven Economic Standings
The Japanese economy stands as the initial G7 economy to announce an economic contraction in the most recent quarter.
With the US yet to release its gross domestic product data for the third quarter, the current Group of Seven growth rankings display:
- The French economy: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (provisional estimate)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump during Diplomatic Dispute with China
Alongside the GDP decline, Japan is experiencing an intensifying political conflict with China concerning Taiwan.
Stocks in Japanese tourism and retail businesses have dropped significantly after China urged its nationals to refrain from visiting to Japan.
This move by Beijing intensified a diplomatic feud that was triggered by comments from Tokyo's new PM about the potential of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of sell-offs across Japanese tourism-related shares.
- The Tokyo Disneyland operator shares fell by 5.7%
- Isetan Mitsukoshi tumbled by 11.3%
- The national carrier declined by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning advising against travel to Japan brings short-term challenges for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality particularly vulnerable."
GDP Contraction Breakdown
Japan's GDP dropped by 0.4% in the third quarter, as industrial overseas shipments were affected by tariffs imposed by the United States recently.
Exports were a major factor of the decline, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two countries reached a trade deal.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"The Japanese economic situation was stable in the initial six months of this year and today's GDP figures showed that growth is halted temporarily.
I anticipate Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has recently acknowledged the effect of tariffs on US consumers, reducing duties on food imports including beef, produce, coffee and fruits amid increasing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
