The Japanese Economy Shrinks while Exports Suffer by US Trade Duties
The Japanese economic system has experienced a drop for the first time in a year and a half, mainly caused by falling exports because of newly imposed US trade duties.
Group of Seven Growth Rankings
Japan stands as the initial Group of Seven country to disclose an output shrinkage in the previous quarter.
With the United States yet to release its GDP figures for the third quarter, the current G7 growth rankings show:
- France: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canada: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japan: negative 0.4 percent
Tourism Shares Slump amid Diplomatic Rift with China
Alongside the GDP decline, Japan is experiencing an growing diplomatic dispute with China regarding Taiwan.
Stocks in Japanese travel and consumer firms have fallen significantly after China urged its residents to refrain from traveling to Japan.
This action by Chinese authorities escalated a political dispute that was sparked by comments from Tokyo's recently appointed PM about the possibility of deploying troops in the event of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japan's leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- The department store chain plummeted by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The China-Japan tension over Taiwan and China's travel warning discouraging travel to Japan brings near-term challenges for consumer-facing sectors.
"Chinese visitors account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services particularly at risk."
Economic Decline Breakdown
Japanese GDP declined by 0.4% in the third quarter, as industrial exports were affected by duties levied by the US this year.
Overseas shipments were a key driver of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.
Previously, the US administration had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15% when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"The Japanese economic situation was solid in the first half of this year and the latest GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently acknowledged the impact of tariffs on US consumers, lowering duties on imported food products including meat, tomatoes, beverages and bananas amid growing concerns about rising costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
