Japan's Economic Output Shrinks as Overseas Sales Face Impact by American Trade Duties
The Japanese economic system has shown a drop for the first time in a year and a half, primarily caused by declining exports as a result of newly imposed US trade duties.
G7 Economic Leaderboard
Japan stands as the initial Group of Seven economy to report an economic contraction in the latest quarter.
With the US yet to release its GDP figures for the third quarter, the present Group of Seven growth standings show:
- France: 0.5 percent expansion
- United Kingdom: +0.1%
- Canada: +0.1% (provisional estimate)
- Germany: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Travel Shares Slump amid Political Rift with China
Alongside the economic contraction, Japan is dealing with an intensifying diplomatic dispute with China concerning Taiwan.
Shares in Japan's travel and consumer firms have dropped significantly after China urged its residents to refrain from traveling to Japan.
This decision by Chinese authorities heightened a political dispute that was triggered by comments from Japan's recently appointed prime minister about the potential of deploying forces in the event of a hypothetical Chinese attack on Taiwan.
The development triggered a wave of selling across Japan's tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain plummeted by 11.3%
- Japan Airlines fell by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory advising against visits to Japan introduces short-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially vulnerable."
Economic Contraction Breakdown
Japanese GDP dropped by 0.4 percent in the July-September quarter, as industrial overseas shipments were impacted by tariffs imposed by the US this year.
Exports were a key factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.
Previously, the US administration had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two countries reached a trade deal.
Private demand also fell, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP figures showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The White House has lately recognized the effect of tariffs on Americans, reducing tariffs on food imports including meat, produce, beverages and fruits amid increasing concerns about rising costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
