The Japanese Economy Contracts as Exports Are Hit by US Tariffs
Japan's economy has experienced a drop for the first time in six quarters, mainly driven by weakening exports as a result of newly imposed American trade duties.
Group of Seven Growth Standings
Japan stands as the first G7 country to announce an output shrinkage in the previous quarter.
With the US yet to release its gross domestic product data for the third quarter, the present G7 growth rankings display:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canada: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: -0.4%
Tourism Stocks Slump amid Political Rift with China
In addition to the GDP decline, Japan is dealing with an escalating diplomatic dispute with China concerning Taiwan.
Shares in Japan's travel and retail firms have declined sharply after China advised its residents to avoid visiting to Japan.
This action by Beijing intensified a diplomatic feud that was triggered by statements from Japan's new prime minister about the potential of sending forces in the case of a potential Chinese invasion on Taiwan.
The situation triggered a surge of sell-offs across Japanese tourism-related stocks.
- The Tokyo Disneyland operator shares dropped by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and China's advisory advising against visits to Japan introduces short-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly at risk."
GDP Decline Details
Japanese GDP declined by 0.4% in the third quarter, as manufacturers' exports were hit by duties imposed by the US recently.
Overseas shipments were a key factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had proposed Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade deal.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"The Japanese economic situation was stable in the first half of this year and the latest GDP figures showed that growth is halted for now.
I anticipate Japan's economy to be returning on a gradual growth trend going forward."
The US administration has lately recognized the effect of tariffs on US consumers, reducing tariffs on imported food products including meat, produce, coffee and fruits amid growing concerns about increasing costs.
Business Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
