The Japanese Economic Output Contracts as Overseas Sales Are Hit by US Tariffs
The Japanese economic system has shown a drop for the initial time in six quarters, largely driven by weakening overseas shipments as a result of newly imposed US tariffs.
G7 Economic Rankings
Japan stands as the initial G7 nation to announce an GDP decline in the previous three-month period.
As the US still needing to publish its gross domestic product figures for the third quarter, the present Group of Seven economic standings show:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canada: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Tourism Shares Decline during Diplomatic Rift with China
Alongside the GDP decline, Japan is dealing with an intensifying diplomatic dispute with China regarding Taiwan.
Shares in Japanese travel and consumer businesses have dropped significantly after China advised its residents to avoid visiting to Japan.
This move by Chinese authorities escalated a diplomatic feud that was sparked by remarks from Japan's new PM about the possibility of deploying troops in the event of a hypothetical Chinese attack on Taiwan.
The development triggered a surge of selling across Japan's leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines declined by 3.75%
"The ongoing dispute over Taiwan and Beijing's advisory discouraging visits to Japan creates short-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services especially vulnerable."
Economic Decline Breakdown
Japanese gross domestic product dropped by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were hit by duties imposed by the US this year.
Exports were a key driver of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had proposed Japan with a additional 25 percent tariff on its goods, which was later reduced to 15 percent when the two countries concluded a trade deal.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP contracted by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that growth is halted for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, reducing duties on food imports including meat, produce, coffee and fruits amid growing concerns about rising costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
