The Japanese Economic Output Shrinks as Overseas Sales Are Hit by American Tariffs
Japan's economy has experienced a contraction for the initial time in six quarters, largely caused by falling exports as a result of recent American trade duties.
G7 Economic Rankings
The Japanese economy has become the initial Group of Seven nation to report an output shrinkage in the previous quarter.
With the US yet to release its GDP figures for the third quarter, the current G7 growth leaderboard indicate:
- France: +0.5% expansion
- United Kingdom: +0.1%
- Canadian economy: +0.1% (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Decline during Political Rift with Beijing
Alongside the GDP decline, Japan is experiencing an intensifying diplomatic dispute with China concerning Taiwan.
Stocks in Japan's travel and consumer businesses have fallen significantly after China recommended its residents to refrain from traveling to Japan.
This action by Beijing intensified a political dispute that was sparked by comments from Tokyo's new PM about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The development triggered a wave of selling across Japanese tourism-related stocks.
- Oriental Land shares dropped by 5.7%
- The department store chain tumbled by 11.3%
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term challenges for retail and hospitality sectors.
"Chinese visitors represent roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly vulnerable."
GDP Contraction Breakdown
Japanese GDP fell by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs levied by the United States recently.
Overseas shipments were a major factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Previously, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15 percent when the two nations reached a trade agreement.
Private demand also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"The Japanese economic situation was strong in the initial six months of this year and the latest GDP figures showed that momentum is halted for now.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on Americans, lowering duties on food imports including meat, tomatoes, coffee and bananas amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
