The Japanese Economic Output Declines as Exports Face Impact by US Trade Duties
The Japanese economic system has recorded a drop for the first time in a year and a half, mainly caused by weakening exports due to recent American tariffs.
G7 Growth Rankings
The Japanese economy stands as the initial Group of Seven nation to report an GDP decline in the latest quarter.
With the US still needing to release its GDP data for the third quarter, the present G7 growth leaderboard display:
- The French economy: +0.5% expansion
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japan: -0.4%
Travel Stocks Slump amid Political Dispute with China
In addition to the GDP decline, Japan is experiencing an growing political tension with China concerning Taiwan.
Shares in Japanese travel and consumer companies have dropped significantly after China recommended its nationals to refrain from traveling to Japan.
This move by Chinese authorities intensified a diplomatic feud that was triggered by statements from Tokyo's new prime minister about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.
The situation caused a wave of sell-offs across Japan's leisure shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier declined by 3.75 percent
"The ongoing tension over Taiwan and China's advisory advising against travel to Japan creates short-term headwinds for retail and hospitality sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."
Economic Contraction Breakdown
Japan's gross domestic product fell by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by tariffs imposed by the US recently.
Exports were a major factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had proposed Japan with a new 25 percent tariff on its products, which was later reduced to 15% when the two nations reached a trade deal.
Consumer spending also fell, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.
"The Japanese economic situation was solid in the initial six months of this year and the latest GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be back on a moderate growth trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, lowering duties on food imports including meat, produce, coffee and fruits amid growing concerns about increasing costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
