Japan's Economy Declines as Overseas Sales Face Impact by US Tariffs
The Japanese economic system has experienced a decline for the first time in six quarters, mainly caused by weakening overseas shipments because of newly imposed American trade duties.
G7 Growth Rankings
The Japanese economy has become the first Group of Seven country to report an economic contraction in the previous quarter.
With the US still needing to release its GDP figures for the third quarter, the current Group of Seven economic standings show:
- The French economy: +0.5% quarterly growth
- UK: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Tourism Shares Slump during Diplomatic Rift with Beijing
Alongside the GDP decline, Japan is dealing with an growing diplomatic dispute with China regarding Taiwan.
Shares in Japanese tourism and consumer companies have fallen sharply after China recommended its residents to avoid visiting to Japan.
This move by Chinese authorities intensified a diplomatic feud that was sparked by statements from Tokyo's new PM about the potential of deploying troops in the case of a potential Chinese invasion on Taiwan.
The situation triggered a wave of sell-offs across Japanese leisure stocks.
- Oriental Land stock fell by 5.7%
- The department store chain plummeted by 11.3%
- Japan Airlines declined by 3.75%
"The ongoing dispute over Taiwan and China's travel warning advising against visits to Japan brings near-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality particularly vulnerable."
Economic Decline Details
Japan's GDP dropped by 0.4% in the third quarter, as industrial overseas shipments were hit by duties imposed by the United States this year.
Exports were a major factor of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two nations reached a trade agreement.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8% in the quarter through September.
"Japan's economy was strong in the first half of this year and the latest GDP figures showed that momentum is halted temporarily.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The White House has recently recognized the effect of tariffs on US consumers, reducing tariffs on food imports including beef, produce, beverages and fruits amid growing concerns about rising costs.
Business Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
