Japan's Economy Contracts as Overseas Sales Suffer by American Trade Duties
Japan's economy has experienced a decline for the first time in a year and a half, largely caused by falling overseas shipments as a result of newly imposed American tariffs.
G7 Economic Rankings
Japan stands as the initial Group of Seven country to report an economic contraction in the most recent quarter.
As the US still needing to release its gross domestic product figures for the third quarter, the current G7 economic leaderboard indicate:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: +0.1% (provisional estimate)
- Germany: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Shares Decline amid Political Rift with China
Alongside the economic contraction, Japan is facing an escalating political tension with China concerning Taiwan.
Shares in Japanese tourism and consumer companies have declined sharply after China recommended its nationals to refrain from traveling to Japan.
This action by Beijing escalated a political dispute that was initiated by remarks from Tokyo's new PM about the possibility of deploying troops in the event of a hypothetical Chinese attack on Taiwan.
The development caused a wave of sell-offs across Japanese leisure stocks.
- The Tokyo Disneyland operator shares dropped by 5.7%
- The department store chain tumbled by 11.3%
- Japan Airlines declined by 3.75%
"The China-Japan tension over Taiwan and China's travel warning advising against visits to Japan introduces short-term difficulties for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly vulnerable."
GDP Contraction Details
Japanese GDP fell by 0.4% in the third quarter, as industrial exports were impacted by tariffs levied by the United States recently.
Overseas shipments were a major driver of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15% when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that momentum is halted for now.
I anticipate Japan's economy to be returning on a moderate recovery trend going forward."
The White House has lately acknowledged the effect of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, beverages and bananas amid growing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
