Japan's Economy Shrinks as Exports Are Hit by American Tariffs
The Japanese economic system has recorded a contraction for the initial time in six quarters, primarily driven by weakening overseas shipments as a result of recent American trade duties.
G7 Economic Leaderboard
The Japanese economy stands as the first G7 economy to disclose an GDP decline in the most recent three-month period.
With the United States yet to publish its gross domestic product figures for the third quarter, the current G7 economic rankings indicate:
- The French economy: +0.5% expansion
- UK: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: -0.4%
Travel Shares Decline amid Political Dispute with China
In addition to the GDP decline, Japan is facing an intensifying political dispute with China regarding Taiwan.
Stocks in Japanese travel and consumer firms have declined significantly after China urged its nationals to refrain from visiting to Japan.
This decision by Chinese authorities escalated a diplomatic feud that was triggered by remarks from Tokyo's recently appointed prime minister about the potential of deploying troops in the case 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 percent
- The national carrier declined by 3.75 percent
"The ongoing dispute over Taiwan and Beijing's travel warning discouraging travel to Japan creates near-term challenges for consumer-facing sectors.
"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."
GDP Contraction Breakdown
Japanese GDP declined by 0.4 percent in the July-September quarter, as manufacturers' exports were impacted by tariffs imposed by the US this year.
Overseas shipments were a major factor of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had threatened Japan with a new 25% tariff on its products, which was later lowered to 15 percent when the two countries reached a trade deal.
Consumer spending also declined, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent in the quarter through September.
"Japan's economy was strong in the initial six months of this year and today's GDP figures showed that momentum is halted temporarily.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The US administration has recently recognized the impact of tariffs on Americans, lowering duties on imported food products including meat, tomatoes, coffee and fruits amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
