Japan's Economic Output Contracts while Overseas Sales Suffer by US Trade Duties
Japan's economy has recorded a contraction for the first time in a year and a half, mainly caused by weakening overseas shipments due to recent US trade duties.
Group of Seven Economic Standings
Japan has become the first Group of Seven country to report an economic contraction in the most recent quarter.
As the United States yet to publish its gross domestic product data for the third quarter, the present G7 economic standings show:
- The French economy: +0.5% expansion
- United Kingdom: +0.1%
- Canada: 0.1 percent (preliminary figure)
- Germany: zero growth
- Italy: no growth
- Japan: -0.4%
Tourism Stocks Decline during Political Dispute with China
Alongside the GDP decline, Japan is experiencing an escalating political dispute with China regarding Taiwan.
Stocks in Japan's travel and consumer firms have dropped sharply after China recommended its residents to refrain from traveling to Japan.
This move by Beijing escalated a diplomatic feud that was initiated by statements from Tokyo's new prime minister about the possibility of deploying forces in the event of a potential Chinese invasion on Taiwan.
The development led to a wave of sell-offs across Japan's leisure stocks.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier declined by 3.75%
"The China-Japan tension over Taiwan and China's travel warning advising against visits to Japan introduces short-term headwinds for consumer-facing sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly at risk."
Economic Decline Breakdown
Japan's gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' exports were hit by duties imposed by the United States this year.
Overseas shipments were a primary driver of the contraction, falling 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 threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two nations concluded a trade deal.
Private demand also declined, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP shrank by 1.8% in the three months through September.
"The Japanese economic situation was strong in the initial six months of this year and today's GDP figures 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 effect of tariffs on Americans, lowering tariffs on food imports including beef, produce, beverages and fruits amid increasing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
