The Japanese Economic Output Contracts while Exports Face Impact by US Trade Duties
Japan's economy has shown a drop for the initial time in a year and a half, mainly driven by falling exports because of recent US trade duties.
G7 Economic Leaderboard
The Japanese economy stands as the initial Group of Seven economy to announce an output shrinkage in the most recent quarter.
As the US still needing to publish its GDP figures for the third quarter, the present G7 growth standings show:
- France: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Slump amid Political Dispute with China
Alongside the economic contraction, Japan is facing an intensifying political conflict with China concerning Taiwan.
Shares in Japan's travel and consumer companies have fallen noticeably after China recommended its nationals to refrain from visiting to Japan.
This decision by Chinese authorities escalated a political dispute that was initiated by remarks from Japan's new PM about the possibility of deploying forces in the event of a potential Chinese attack on Taiwan.
The situation triggered a surge of sell-offs across Japanese leisure stocks.
- Oriental Land shares fell by 5.7%
- Isetan Mitsukoshi tumbled by 11.3 percent
- Japan Airlines fell by 3.75%
"The ongoing dispute over Taiwan and Beijing's travel warning discouraging travel to Japan creates near-term headwinds for retail and hospitality sectors.
"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially vulnerable."
GDP Decline Breakdown
Japanese gross domestic product declined by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the United States this year.
Exports were a major driver of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two nations reached a trade agreement.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The US administration has recently recognized the impact of tariffs on Americans, lowering duties on imported food products including meat, produce, beverages and bananas amid growing concerns about increasing costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
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