Japan's Economy Declines while Exports Suffer by American Trade Duties
The Japanese economic system has experienced a decline for the first time in a year and a half, primarily caused by weakening exports because of newly imposed American tariffs.
Group of Seven Growth Rankings
The Japanese economy stands as the first G7 economy to report an economic contraction in the most recent quarter.
With the US yet to publish its gross domestic product figures for the third quarter, the present Group of Seven economic leaderboard indicate:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- German economy: 0%
- Italian economy: 0%
- Japanese economy: -0.4%
Travel Shares Decline during Political Dispute with Beijing
Alongside the economic contraction, Japan is dealing with an growing political tension with China regarding Taiwan.
Shares in Japanese travel and consumer companies have declined significantly after China advised its nationals to refrain from traveling to Japan.
This move by Beijing intensified a political dispute that was initiated by remarks from Japan's recently appointed PM about the potential of deploying troops in the event of a potential Chinese invasion on Taiwan.
The situation caused a surge of sell-offs across Japanese leisure stocks.
- The Tokyo Disneyland operator shares dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines declined by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory discouraging travel to Japan introduces near-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."
GDP Decline Breakdown
Japan's GDP fell by 0.4% in the July-September quarter, as industrial overseas shipments were hit by duties imposed by the US this year.
Overseas shipments were a primary driver 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 proposed Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annual basis, Japan's GDP contracted by 1.8% in the quarter through September.
"The Japanese economic situation was strong in the initial six months of this year and the latest GDP figures showed that growth is halted temporarily.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The US administration has recently recognized the impact of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, beverages and fruits amid growing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
