The Japanese Economy Contracts while Exports Suffer by US Trade Duties
The Japanese economic system has experienced a drop for the first time in a year and a half, primarily caused by declining exports as a result of newly imposed US trade duties.
Group of Seven Economic Rankings
Japan stands as the first Group of Seven nation to disclose an GDP decline in the latest three-month period.
As the US yet to publish its gross domestic product data for the third quarter, the present G7 growth standings indicate:
- France: +0.5% expansion
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Decline during Diplomatic Rift with Beijing
In addition to the GDP decline, Japan is dealing with an escalating diplomatic conflict with China regarding Taiwan.
Stocks in Japanese tourism and retail businesses have declined sharply after China recommended its residents to refrain from visiting to Japan.
This action by Beijing escalated a political dispute that was sparked by remarks from Tokyo's recently appointed prime minister about the possibility of deploying forces in the case of a potential Chinese invasion on Taiwan.
The development caused a surge of selling across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- The department store chain plummeted by 11.3%
- The national carrier fell by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory advising against travel to Japan brings near-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services particularly at risk."
Economic Contraction Breakdown
Japan's GDP declined by 0.4 percent in the July-September quarter, as manufacturers' exports were affected by duties levied by the United States this year.
Exports were a key driver of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade deal.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"The Japanese economic situation was solid in the initial six months of this year and the latest GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The US administration has recently recognized the effect of tariffs on US consumers, lowering tariffs on imported food products including beef, tomatoes, coffee and bananas amid increasing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
