The Japanese Economic Output Contracts as Overseas Sales Suffer by American Trade Duties
Japan's economy has recorded a contraction for the initial time in a year and a half, primarily driven by falling overseas shipments due to recent US trade duties.
G7 Growth Leaderboard
Japan stands as the initial Group of Seven country to disclose an output shrinkage in the most recent three-month period.
With the United States yet to release its gross domestic product figures for the third quarter, the current Group of Seven economic rankings show:
- The French economy: 0.5 percent expansion
- UK: +0.1%
- Canada: 0.1 percent (preliminary figure)
- Germany: zero growth
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Stocks Decline during Political Dispute with Beijing
Alongside the GDP decline, Japan is experiencing an intensifying political conflict with China concerning Taiwan.
Stocks in Japan's travel and consumer businesses have fallen noticeably after China urged its nationals to avoid traveling to Japan.
This move by Chinese authorities intensified a diplomatic feud that was sparked by statements from Tokyo's recently appointed prime minister about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.
The development caused a surge of selling across Japanese tourism-related stocks.
- Oriental Land stock dropped by 5.7%
- Isetan Mitsukoshi tumbled by 11.3%
- The national carrier fell by 3.75 percent
"The China-Japan dispute over Taiwan and China's travel warning discouraging visits to Japan creates short-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."
Economic Decline Breakdown
Japanese gross domestic product fell by 0.4 percent in the July-September quarter, as industrial overseas shipments were hit by duties imposed by the US recently.
Overseas shipments were a key driver of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries concluded a trade deal.
Private demand also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"The Japanese economic situation was stable in the first half of this year and the latest GDP data showed that growth is paused for now.
I anticipate Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, reducing duties on food imports including beef, tomatoes, coffee and bananas amid growing concerns about rising costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
