Japan's Economic Output Shrinks while Exports Suffer by American Tariffs
The Japanese economic system has recorded a contraction for the first time in a year and a half, largely caused by falling exports as a result of newly imposed US trade duties.
Group of Seven Growth Leaderboard
Japan has become the initial Group of Seven nation to announce an GDP decline in the most recent quarter.
With the US still needing to release its gross domestic product data for the third quarter, the current Group of Seven economic standings show:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: 0%
- Italy: 0%
- Japan: -0.4%
Tourism Stocks Decline during Diplomatic Dispute with China
Alongside the GDP decline, Japan is facing an growing political tension with China concerning Taiwan.
Shares in Japan's travel and retail businesses have dropped sharply after China recommended its nationals to avoid traveling to Japan.
This move by Chinese authorities intensified a political dispute that was triggered by statements from Japan's recently appointed PM about the possibility of sending troops in the event of a hypothetical Chinese attack on Taiwan.
The situation led to a wave of sell-offs across Japanese tourism-related shares.
- The Tokyo Disneyland operator shares dropped by 5.7%
- The department store chain plummeted by 11.3 percent
- The national carrier declined by 3.75 percent
"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan brings near-term difficulties for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly at risk."
Economic Decline Breakdown
Japan's gross domestic product fell by 0.4% in the July-September quarter, as industrial overseas shipments were affected by duties levied by the US recently.
Exports were a major factor of the contraction, dropping 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 threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade agreement.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"Japan's economy was stable in the first half of this year and the latest GDP figures showed that growth is paused for now.
I anticipate Japan's economy to be back on a moderate recovery trend going forward."
The White House has recently recognized the impact of tariffs on US consumers, lowering duties on food imports including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August