The Japanese Economy Shrinks as Exports Suffer by US Tariffs
The Japanese economic system has experienced a decline for the initial time in a year and a half, mainly caused by declining overseas shipments as a result of newly imposed US trade duties.
Group of Seven Growth Standings
The Japanese economy stands as the initial G7 nation to report an GDP decline in the most recent quarter.
As the United States yet to release its GDP figures for the third quarter, the current G7 growth standings indicate:
- France: +0.5% expansion
- UK: 0.1 percent
- Canada: +0.1% (provisional estimate)
- German economy: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Travel Shares Slump during Political Rift with China
In addition to the economic contraction, Japan is facing an growing political tension with China regarding Taiwan.
Shares in Japan's tourism and retail firms have declined significantly after China urged its citizens to avoid visiting to Japan.
This move by Beijing heightened a political dispute that was triggered by statements from Japan's new PM about the potential of deploying forces in the event of a potential Chinese invasion on Taiwan.
The situation caused a wave of sell-offs across Japanese tourism-related shares.
- The Tokyo Disneyland operator shares fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier declined by 3.75 percent
"The ongoing dispute over Taiwan and China's travel warning advising against visits to Japan brings short-term difficulties for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality particularly vulnerable."
GDP Contraction Details
Japan's gross domestic product dropped by 0.4 percent in the third quarter, as manufacturers' exports were impacted by tariffs imposed by the United States recently.
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 year ago.
Earlier this year, the US administration had proposed Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade deal.
Private demand also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.
"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has lately acknowledged the impact of tariffs on US consumers, lowering tariffs on food imports including meat, produce, coffee and bananas amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
