Japan's Economic Output Shrinks while Overseas Sales Are Hit by US Tariffs
Japan's economy has shown a decline for the first time in a year and a half, largely driven by weakening exports due to newly imposed US trade duties.
G7 Economic Standings
Japan stands as the first Group of Seven country to report an GDP decline in the previous three-month period.
As the United States yet to publish its GDP data for the third quarter, the current G7 growth rankings show:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: negative 0.4 percent
Tourism Shares Decline amid Diplomatic Rift with Beijing
Alongside the GDP decline, Japan is facing an growing diplomatic dispute with China regarding Taiwan.
Stocks in Japan's travel and consumer firms have dropped noticeably after China advised its citizens to avoid traveling to Japan.
This move by Beijing heightened a diplomatic feud that was initiated by remarks from Japan's recently appointed prime minister about the potential of deploying forces in the event of a potential Chinese attack on Taiwan.
The development triggered a wave of sell-offs across Japan's tourism-related stocks.
- Oriental Land stock fell by 5.7%
- The department store chain tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan brings short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially vulnerable."
GDP Contraction Details
Japan's GDP declined by 0.4 percent in the third quarter, as industrial exports were affected by tariffs imposed by the United States recently.
Exports were a primary factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had proposed Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade agreement.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP shrank 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 data showed that momentum is halted for now.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately recognized the effect of tariffs on Americans, reducing duties on imported food products including beef, produce, coffee and bananas amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
