The Japanese Economy Shrinks while Overseas Sales Are Hit by US Trade Duties
The Japanese economic system has recorded a contraction for the initial time in a year and a half, largely driven by declining exports because of recent American trade duties.
G7 Growth Standings
Japan stands as the first G7 country to announce an economic contraction in the most recent three-month period.
As the United States yet to publish its gross domestic product data for the third quarter, the current G7 growth leaderboard indicate:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japan: -0.4%
Travel Stocks Slump during Diplomatic Dispute with Beijing
In addition to the economic contraction, Japan is dealing with an growing political tension with China concerning Taiwan.
Shares in Japan's travel and retail companies have fallen significantly after China advised its nationals to avoid traveling to Japan.
This move by Beijing escalated a political dispute that was triggered by comments from Tokyo's recently appointed prime minister about the potential of sending forces in the event of a potential Chinese invasion on Taiwan.
The development triggered a wave of selling across Japan's leisure stocks.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain tumbled by 11.3%
- The national carrier fell by 3.75%
"The China-Japan dispute over Taiwan and Beijing's advisory advising against visits to Japan introduces near-term headwinds for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly at risk."
GDP Contraction Breakdown
Japan's GDP declined by 0.4% in the July-September quarter, as industrial exports were affected by tariffs levied by the United States recently.
Overseas shipments were a primary factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent 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% in the three months through September.
"Japan's economy was stable in the first half 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 gradual recovery trend going forward."
The US administration has lately recognized the impact of tariffs on US consumers, lowering duties on imported food products including meat, produce, beverages and bananas amid growing concerns about rising costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
