The Japanese Economic Output Contracts while Overseas Sales Suffer by American Trade Duties
The Japanese economic system has recorded a decline for the initial time in a year and a half, mainly driven by weakening overseas shipments due to recent US tariffs.
G7 Growth Leaderboard
Japan stands as the initial Group of Seven economy to announce an output shrinkage in the previous three-month period.
With the United States still needing to release its gross domestic product data for the third quarter, the present G7 growth standings indicate:
- France: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: no growth
- Japanese economy: negative 0.4 percent
Tourism Stocks Slump amid Diplomatic Rift with China
Alongside the economic contraction, Japan is facing an intensifying diplomatic tension with China regarding Taiwan.
Shares in Japan's tourism and consumer firms have declined noticeably after China advised its citizens to avoid traveling to Japan.
This action by Chinese authorities intensified a political dispute that was sparked by remarks from Japan's recently appointed PM about the potential of deploying forces in the event of a hypothetical Chinese invasion on Taiwan.
The development triggered a wave of sell-offs across Japan's tourism-related stocks.
- Oriental Land shares dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier fell by 3.75%
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan introduces short-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality particularly at risk."
GDP Contraction Breakdown
Japan's gross domestic product fell by 0.4% in the July-September quarter, as industrial exports were hit by duties imposed by the United States recently.
Exports were a key factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two nations concluded a trade deal.
Private demand 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 strong in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on Americans, reducing duties on food imports including meat, tomatoes, coffee and bananas amid growing concerns about rising costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
