The Japanese Economy Declines while Exports Are Hit by US Tariffs
Japan's economy has shown a drop for the first time in a year and a half, primarily driven by declining overseas shipments due to recent US trade duties.
Group of Seven Economic Standings
Japan has become the initial Group of Seven country to announce an GDP decline in the most recent three-month period.
As the US still needing to publish its gross domestic product data for the third quarter, the present Group of Seven economic leaderboard indicate:
- France: 0.5 percent expansion
- UK: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: zero growth
- Italy: 0%
- Japan: -0.4%
Tourism Stocks Slump amid Diplomatic Rift with Beijing
In addition to the GDP decline, Japan is facing an escalating political conflict with China concerning Taiwan.
Shares in Japanese tourism and consumer companies have fallen noticeably after China urged its residents to avoid traveling to Japan.
This action by Beijing escalated a political dispute that was initiated 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 led to a wave of selling across Japan's leisure stocks.
- The Tokyo Disneyland operator shares fell by 5.7%
- The department store chain plummeted by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning advising against travel to Japan creates short-term challenges for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly at risk."
GDP Contraction Details
Japanese gross domestic product dropped by 0.4% in the July-September quarter, as industrial exports were impacted by duties imposed by the US this year.
Overseas shipments were a key factor of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two countries concluded a trade deal.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"The Japanese economic situation was stable in the initial six months of this year and the latest GDP figures showed that momentum is paused for now.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The US administration has recently recognized the impact of tariffs on US consumers, lowering tariffs on imported food products including beef, produce, beverages and bananas amid increasing concerns about rising costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
