Japan's Economy Declines as Exports Are Hit by US Tariffs
The Japanese economic system has shown a drop for the first time in a year and a half, largely caused by weakening exports due to recent American tariffs.
Group of Seven Economic Standings
Japan has become the first G7 economy to announce an GDP decline in the previous three-month period.
As the United States still needing to release its GDP data for the third quarter, the present G7 growth standings display:
- The French economy: 0.5 percent quarterly growth
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Travel Stocks Slump during Political Dispute with Beijing
In addition to the GDP decline, Japan is experiencing an growing political tension with China regarding Taiwan.
Shares in Japan's tourism and retail businesses have declined significantly after China urged its residents to refrain from visiting to Japan.
This action by Beijing escalated a diplomatic feud that was initiated by remarks from Tokyo's recently appointed prime minister about the potential of sending forces in the case of a hypothetical Chinese attack on Taiwan.
The development led to a surge of sell-offs across Japan's tourism-related stocks.
- Oriental Land stock dropped by 5.7%
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The ongoing tension over Taiwan and Beijing's travel warning discouraging visits to Japan brings short-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly vulnerable."
Economic Decline Details
Japanese gross domestic product dropped by 0.4% in the third quarter, as manufacturers' overseas shipments were hit by tariffs imposed by the United States recently.
Overseas shipments were a key driver of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the American government had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the quarter through September.
"Japan's economy was solid in the first half of this year and the latest GDP data showed that growth is halted temporarily.
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 US consumers, lowering tariffs on food imports including meat, produce, coffee and bananas amid growing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
