Japan's Economic Output Shrinks while Overseas Sales Suffer by US Tariffs
The Japanese economic system has shown a decline for the initial time in a year and a half, mainly caused by weakening overseas shipments because of recent American trade duties.
Group of Seven Growth Standings
The Japanese economy stands as the initial G7 country to report an economic contraction in the most recent three-month period.
As the United States yet to publish its GDP figures for the third quarter, the present Group of Seven economic rankings indicate:
- The French economy: +0.5% expansion
- UK: 0.1 percent
- Canadian economy: +0.1% (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Shares Decline during Diplomatic Dispute with China
In addition to the economic contraction, Japan is dealing with an growing political dispute with China concerning Taiwan.
Stocks in Japan's travel and retail firms have dropped significantly after China advised its residents to avoid traveling to Japan.
This action by Beijing heightened a diplomatic feud that was initiated by remarks from Tokyo's recently appointed prime minister about the possibility of sending forces in the event of a hypothetical Chinese invasion on Taiwan.
The situation caused a wave of sell-offs across Japanese tourism-related shares.
- The Tokyo Disneyland operator shares fell by 5.7%
- The department store chain tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's travel warning advising against visits to Japan creates near-term challenges for consumer-facing sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly at risk."
GDP Decline Details
Japan's GDP fell by 0.4% in the third quarter, as industrial overseas shipments were impacted by duties imposed by the United States recently.
Overseas shipments were a major driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Previously, the US administration had threatened Japan with a new 25% tariff on its goods, which was later reduced to 15% when the two countries concluded a trade agreement.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP data showed that growth is paused for now.
I expect Japan's economy to be back on a gradual growth trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, lowering tariffs on imported food products including meat, produce, beverages and fruits 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
