The Japanese Economy Shrinks as Exports Face Impact by American Trade Duties
The Japanese economic system has recorded a contraction for the first time in a year and a half, primarily caused by weakening overseas shipments as a result of newly imposed American tariffs.
Group of Seven Economic Rankings
Japan stands as the initial G7 country to announce an output shrinkage in the previous three-month period.
With the United States still needing to publish its GDP figures for the third quarter, the current G7 economic rankings indicate:
- France: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canadian economy: +0.1% (provisional estimate)
- German economy: zero growth
- Italy: no growth
- Japan: negative 0.4 percent
Travel Shares Slump during Political Dispute with Beijing
In addition to the GDP decline, Japan is dealing with an escalating diplomatic conflict with China regarding Taiwan.
Shares in Japan's travel and retail businesses have fallen sharply after China urged its residents to refrain from traveling to Japan.
This move by Beijing escalated a political dispute that was sparked by remarks from Tokyo's recently appointed prime minister about the potential of deploying forces in the event of a hypothetical Chinese invasion on Taiwan.
The development triggered a wave of selling across Japanese tourism-related stocks.
- Oriental Land stock fell by 5.7 percent
- The department store chain tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan dispute over Taiwan and China's travel warning advising against visits to Japan introduces short-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services particularly vulnerable."
Economic Contraction Breakdown
Japan's gross domestic product declined by 0.4 percent in the third quarter, as industrial overseas shipments were impacted by tariffs levied by the United States this year.
Exports were a primary factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the American government had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two countries reached a trade deal.
Private demand also fell, by 0.3% compared to the previous quarter.
On an annual basis, Japan's GDP contracted by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The White House has lately acknowledged the impact of tariffs on Americans, lowering duties on imported food products including beef, produce, coffee and bananas amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
