Japan's Economic Output Shrinks while Exports Are Hit by American Tariffs
The Japanese economic system has recorded a decline for the initial time in six quarters, largely caused by declining exports as a result of newly imposed American trade duties.
G7 Economic Leaderboard
The Japanese economy stands as the first Group of Seven nation to report an output shrinkage in the most recent quarter.
As the US still needing to publish its GDP figures for the third quarter, the present Group of Seven economic rankings show:
- France: +0.5% expansion
- UK: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Travel Stocks Decline during Diplomatic Dispute with Beijing
Alongside the GDP decline, Japan is facing an escalating diplomatic conflict with China concerning Taiwan.
Stocks in Japanese travel and consumer companies have fallen sharply after China recommended its citizens to refrain from traveling to Japan.
This move by Beijing intensified a diplomatic feud that was initiated by statements from Japan's new prime minister about the potential of sending troops in the event of a potential Chinese attack on Taiwan.
The development caused a surge of selling across Japanese leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines fell by 3.75%
"The ongoing tension over Taiwan and China's travel warning discouraging visits to Japan introduces short-term challenges for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly at risk."
GDP Contraction Details
Japan's gross domestic product declined by 0.4 percent in the July-September quarter, as manufacturers' exports were affected by tariffs imposed by the US this year.
Exports were a primary driver of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.
Previously, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two nations reached a trade deal.
Private demand also fell, by 0.3% compared to the previous quarter.
On an annual basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"Japan's economy was stable in the initial six months of this year and today's GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be back on a moderate growth trend going forward."
The US administration has recently recognized the impact of tariffs on Americans, lowering tariffs on food imports including beef, produce, coffee and bananas amid increasing concerns about rising costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
