Japan's Economy Declines while Exports Face Impact by US Tariffs
Japan's economy has experienced a decline for the initial time in six quarters, primarily caused by declining exports because of newly imposed US trade duties.
Group of Seven Economic Rankings
Japan stands as the first G7 economy to report an economic contraction in the latest quarter.
With the United States yet to publish its GDP data for the third quarter, the present G7 economic rankings display:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canada: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japan: -0.4%
Travel Shares Slump amid Diplomatic Dispute with Beijing
Alongside the GDP decline, Japan is experiencing an growing political tension with China concerning Taiwan.
Stocks in Japan's travel and consumer companies have declined sharply after China recommended its nationals to refrain from visiting to Japan.
This decision by Beijing heightened a diplomatic feud that was sparked by comments from Japan's new PM about the possibility of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation caused a wave of sell-offs across Japan's leisure stocks.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain plummeted by 11.3 percent
- Japan Airlines fell by 3.75%
"The ongoing tension over Taiwan and China's advisory advising against visits to Japan introduces near-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially vulnerable."
GDP Contraction Details
Japanese GDP dropped by 0.4% in the July-September quarter, as industrial overseas shipments were impacted by tariffs levied by the US this year.
Overseas shipments were a major driver of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the American government had threatened Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two nations reached a trade deal.
Consumer spending also fell, by 0.3 percent 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 today's GDP data showed that momentum is halted for now.
I expect Japan's economy to be back on a moderate growth trend going forward."
The US administration has lately acknowledged the impact of tariffs on US consumers, lowering tariffs on imported food products including beef, tomatoes, coffee and bananas amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
