The Japanese Economic Output Contracts while Exports Suffer by US Trade Duties
The Japanese economic system has recorded a decline for the initial time in a year and a half, largely caused by weakening exports as a result of recent US tariffs.
G7 Economic Rankings
Japan stands as the initial G7 country to disclose an economic contraction in the previous three-month period.
With the US still needing to publish its GDP data for the third quarter, the current Group of Seven economic standings display:
- The French economy: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: no growth
- Japan: negative 0.4 percent
Tourism Stocks Decline during Diplomatic Rift with Beijing
Alongside the economic contraction, Japan is dealing with an intensifying political tension with China regarding Taiwan.
Stocks in Japanese tourism and consumer companies have fallen significantly after China recommended its citizens to avoid visiting to Japan.
This move by Beijing intensified a diplomatic feud that was sparked by comments from Japan's recently appointed PM about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of selling across Japan's tourism-related stocks.
- The Tokyo Disneyland operator shares dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning advising against visits to Japan creates near-term difficulties for retail and hospitality sectors.
"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality especially vulnerable."
GDP Decline Details
Japan's GDP fell by 0.4 percent in the July-September quarter, as industrial exports were impacted by duties levied by the US this year.
Overseas shipments were a primary driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5 percent 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 reached a trade agreement.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualized 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 today's GDP figures showed that growth is halted for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The White House has recently recognized the effect of tariffs on Americans, lowering duties on food imports including meat, produce, coffee and fruits amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
