The Japanese Economy Shrinks while Exports Face Impact by US Trade Duties
Japan's economy has shown a decline for the first time in six quarters, mainly driven by falling overseas shipments due to newly imposed US tariffs.
Group of Seven Economic Rankings
The Japanese economy has become the first Group of Seven nation to disclose an economic contraction in the most recent three-month period.
With the US yet to publish its GDP figures for the third quarter, the present G7 growth rankings show:
- France: +0.5% quarterly growth
- UK: +0.1%
- Canada: +0.1% (provisional estimate)
- Germany: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Shares Slump amid Political Rift with China
In addition to the GDP decline, Japan is facing an escalating diplomatic dispute with China concerning Taiwan.
Stocks in Japan's travel and retail companies have fallen sharply after China urged its citizens to avoid traveling to Japan.
This move by Beijing intensified a diplomatic feud that was triggered by remarks from Tokyo's recently appointed prime minister about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.
The development triggered a wave of sell-offs across Japan's leisure shares.
- The Tokyo Disneyland operator stock fell by 5.7%
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's advisory advising against travel to Japan brings near-term difficulties for retail and hospitality sectors.
"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly vulnerable."
GDP Contraction Details
Japanese GDP fell by 0.4 percent in the July-September quarter, as industrial exports were impacted by tariffs levied by the United States this year.
Overseas shipments were a primary factor of the decline, 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 proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries reached a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.
"Japan's economy was solid in the first half of this year and today's GDP data showed that growth is paused temporarily.
I expect Japan's economy to be back on a moderate growth trend going forward."
The White House has lately acknowledged the impact of tariffs on Americans, reducing duties on imported food products including meat, tomatoes, coffee and bananas amid growing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
