Japan's Economy Contracts while Overseas Sales Suffer by American Tariffs
The Japanese economic system has shown a contraction for the initial time in a year and a half, mainly driven by falling exports as a result of recent American tariffs.
Group of Seven Economic Standings
Japan stands as the initial Group of Seven economy to report an economic contraction in the latest quarter.
As the United States still needing to publish its gross domestic product data for the third quarter, the current Group of Seven growth rankings show:
- France: +0.5% expansion
- UK: +0.1%
- Canada: 0.1 percent (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Shares Decline during Political Rift with Beijing
In addition to the economic contraction, Japan is experiencing an intensifying diplomatic conflict with China regarding Taiwan.
Shares in Japan's tourism and retail firms have fallen noticeably after China recommended its citizens to refrain from traveling to Japan.
This action by Chinese authorities escalated a diplomatic feud that was initiated by comments from Tokyo's new PM about the potential of deploying forces in the case of a hypothetical Chinese attack on Taiwan.
The development triggered a surge of selling across Japanese tourism-related shares.
- 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%
"The ongoing tension over Taiwan and Beijing's travel warning discouraging travel to Japan introduces short-term headwinds for consumer-facing sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, luxury retail, and tourism services especially at risk."
Economic Contraction Breakdown
Japan's gross domestic product dropped by 0.4 percent in the third quarter, as industrial exports were affected by tariffs levied by the US this year.
Overseas shipments were a key driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two countries 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.
"The Japanese economic situation was strong in the first half of this year and the latest GDP figures showed that momentum is paused temporarily.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The White House has lately acknowledged the effect of tariffs on Americans, lowering duties on imported food products including beef, produce, coffee and bananas amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
