The Japanese Economic Output Contracts while Exports Suffer by American Trade Duties
Japan's economy has recorded a decline for the initial time in six quarters, largely driven by declining exports as a result of newly imposed American trade duties.
G7 Economic Standings
Japan has become the first G7 nation to announce an economic contraction in the most recent three-month period.
As the US still needing to publish its GDP figures for the third quarter, the present Group of Seven economic rankings indicate:
- France: +0.5% expansion
- United Kingdom: 0.1 percent
- Canada: 0.1 percent (provisional estimate)
- German economy: zero growth
- Italy: 0%
- Japanese economy: -0.4%
Travel Stocks Decline during Political Rift with China
Alongside the GDP decline, Japan is experiencing an escalating diplomatic conflict with China regarding Taiwan.
Shares in Japanese travel and consumer firms have dropped noticeably after China advised its citizens to avoid visiting to Japan.
This move by Chinese authorities heightened a political dispute that was triggered by comments from Tokyo's recently appointed prime minister about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The development led to a wave of selling across Japan's tourism-related stocks.
- Oriental Land shares dropped by 5.7%
- The department store chain tumbled by 11.3%
- Japan Airlines declined by 3.75 percent
"The ongoing dispute over Taiwan and China's travel warning advising against visits to Japan creates near-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly at risk."
GDP Decline Details
Japanese GDP dropped by 0.4 percent in the third quarter, as industrial overseas shipments were hit by tariffs imposed by the US recently.
Exports were a major driver of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the American government had threatened Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two nations reached a trade deal.
Consumer spending also declined, 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 data showed that growth is paused for now.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, reducing duties on imported food products including meat, tomatoes, coffee and fruits amid growing concerns about rising costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August