The Japanese Economy Declines as Overseas Sales Suffer by American Tariffs
Japan's economy has experienced a contraction for the first time in six quarters, largely driven by falling overseas shipments because of recent US tariffs.
Group of Seven Growth Standings
Japan has become the first G7 economy to disclose an GDP decline in the previous three-month period.
As the US yet to publish its GDP figures for the third quarter, the current Group of Seven growth standings display:
- The French economy: +0.5% quarterly growth
- UK: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: -0.4%
Tourism Shares Slump amid Political Rift with China
Alongside the economic contraction, Japan is dealing with an growing diplomatic tension with China regarding Taiwan.
Stocks in Japanese tourism and retail businesses have dropped significantly after China advised its residents to refrain from visiting to Japan.
This action by Chinese authorities intensified a diplomatic feud that was initiated by comments from Tokyo's recently appointed prime minister about the potential of sending troops in the event of a potential Chinese invasion on Taiwan.
The development caused a surge of selling across Japan's leisure stocks.
- Oriental Land shares 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 Beijing's advisory advising against visits to Japan introduces near-term headwinds for consumer-facing sectors.
"Tourists from China represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly at risk."
Economic Decline Details
Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as industrial exports were impacted by duties levied by the United States this year.
Overseas shipments were a key factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two nations concluded a trade agreement.
Consumer spending also fell, by 0.3% compared to the previous quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the quarter through September.
"Japan's economy was stable in the initial six months of this year and the latest GDP data showed that growth is halted for now.
I anticipate Japan's economy to be back on a moderate growth trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, lowering duties on imported food products including beef, tomatoes, beverages and fruits amid increasing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
