The Japanese Economy Shrinks while Overseas Sales Are Hit by American Tariffs
The Japanese economic system has recorded a contraction for the initial time in a year and a half, primarily caused by weakening overseas shipments due to newly imposed American trade duties.
G7 Growth Standings
The Japanese economy has become the first Group of Seven nation to report an GDP decline in the most recent three-month period.
With the United States yet to release its GDP data for the third quarter, the current Group of Seven growth standings show:
- France: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canada: 0.1 percent (provisional estimate)
- German economy: zero growth
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Decline amid Political Dispute with China
Alongside the GDP decline, Japan is experiencing an escalating political tension with China regarding Taiwan.
Stocks in Japan's travel and consumer companies have declined noticeably after China recommended its nationals to refrain from traveling to Japan.
This move by Chinese authorities intensified a diplomatic feud that was triggered by remarks from Japan's recently appointed prime minister about the possibility of sending troops in the case of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of sell-offs across Japanese tourism-related shares.
- Oriental Land stock fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier declined by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory advising against travel to Japan creates near-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly at risk."
Economic Decline Details
Japanese GDP declined by 0.4 percent in the third quarter, as manufacturers' exports were impacted by duties levied by the United States this year.
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 the same period last year.
Earlier this year, the American government had proposed Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade agreement.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the quarter through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The White House has lately recognized the effect of tariffs on US consumers, lowering duties on imported food products including meat, tomatoes, beverages and fruits amid growing concerns about rising costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August