The Japanese Economy Declines as Overseas Sales Suffer by American Trade Duties
The Japanese economic system has recorded a decline for the initial time in six quarters, largely driven by declining overseas shipments because of newly imposed American trade duties.
Group of Seven Growth Rankings
The Japanese economy has become the first Group of Seven economy to report an economic contraction in the most recent quarter.
With the US yet to release its GDP figures for the third quarter, the current G7 economic standings display:
- France: 0.5 percent quarterly growth
- UK: +0.1%
- Canada: +0.1% (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japanese economy: negative 0.4 percent
Tourism Stocks Decline during Diplomatic Rift with China
In addition to the economic contraction, Japan is facing an intensifying political tension with China regarding Taiwan.
Stocks in Japanese tourism and retail firms have declined noticeably after China advised its nationals to refrain from traveling to Japan.
This decision by Chinese authorities escalated a diplomatic feud that was initiated by statements from Tokyo's recently appointed prime minister about the potential of sending troops in the case of a hypothetical Chinese invasion on Taiwan.
The situation led to a surge of sell-offs across Japanese leisure shares.
- The Tokyo Disneyland operator stock fell by 5.7%
- The department store chain tumbled by 11.3%
- The national carrier declined by 3.75 percent
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging travel to Japan creates short-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and tourism services especially at risk."
GDP Decline Details
Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as industrial exports were hit by duties levied by the US this year.
Exports were a primary driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Previously, the US administration had proposed Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two nations reached a trade agreement.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"The Japanese economic situation was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted for now.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently recognized the impact of tariffs on Americans, lowering tariffs on food imports including beef, produce, beverages and fruits amid increasing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
