Japan's Economic Output Declines while Exports Are Hit by American Trade Duties
Japan's economy has shown a drop for the initial time in six quarters, largely driven by declining exports as a result of newly imposed US tariffs.
G7 Growth Standings
The Japanese economy has become the initial G7 economy to report an economic contraction in the latest three-month period.
As the US yet to publish its gross domestic product figures for the third quarter, the present Group of Seven growth leaderboard indicate:
- France: 0.5 percent expansion
- UK: 0.1 percent
- Canada: 0.1 percent (provisional estimate)
- German economy: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Travel Shares Decline amid Political Dispute with China
Alongside the economic contraction, Japan is experiencing an intensifying diplomatic conflict with China concerning Taiwan.
Stocks in Japan's travel and consumer companies have declined significantly after China recommended its nationals to avoid traveling to Japan.
This action by Chinese authorities escalated a diplomatic feud that was sparked by statements from Tokyo's new prime minister about the possibility of sending forces in the event of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japan's tourism-related stocks.
- Oriental Land stock dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- The national carrier fell by 3.75%
"The ongoing tension over Taiwan and China's advisory advising against travel to Japan creates short-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality especially vulnerable."
Economic Contraction Breakdown
Japan's GDP fell by 0.4 percent in the third quarter, as industrial overseas shipments were impacted by duties imposed by the US recently.
Exports were a key 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 proposed Japan with a new 25% tariff on its goods, which was later lowered to 15% when the two nations concluded a trade agreement.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP contracted by 1.8% in the quarter through September.
"The Japanese economic situation was solid in the initial six months of this year and today's GDP data showed that growth is paused temporarily.
I anticipate Japan's economy to be returning on a moderate recovery trend going forward."
The White House has recently acknowledged the effect of tariffs on Americans, lowering duties on food imports including meat, tomatoes, beverages and bananas amid increasing concerns about increasing costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
