Japan's Economic Output Shrinks as Exports Face Impact by American Tariffs
Japan's economy has experienced a drop for the first time in a year and a half, largely driven by falling exports due to recent US trade duties.
Group of Seven Growth Leaderboard
The Japanese economy has become the initial G7 country to disclose an GDP decline in the previous quarter.
With the United States yet to release its GDP figures for the third quarter, the current G7 economic leaderboard display:
- The French economy: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: no growth
- Japan: negative 0.4 percent
Tourism Shares Decline amid Political Dispute with Beijing
Alongside the economic contraction, Japan is facing an growing political tension with China concerning Taiwan.
Shares in Japan's tourism and retail businesses have dropped significantly after China advised its citizens to refrain from visiting to Japan.
This move by Beijing escalated a political dispute that was sparked by statements from Japan's recently appointed prime minister about the possibility of deploying forces in the case of a potential Chinese attack on Taiwan.
The development triggered a wave of sell-offs across Japanese leisure shares.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- The department store chain tumbled by 11.3%
- The national carrier declined by 3.75%
"The China-Japan tension over Taiwan and China's advisory advising against visits to Japan introduces short-term difficulties for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality especially vulnerable."
Economic Decline Breakdown
Japanese gross domestic product dropped by 0.4% in the third quarter, as industrial overseas shipments were affected by tariffs imposed by the United States this year.
Exports were a primary driver of the decline, falling 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 additional 25 percent tariff on its products, which was later reduced to 15 percent when the two nations reached a trade deal.
Private demand also declined, 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 today's GDP figures showed that momentum is paused temporarily.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The White House has lately recognized the effect of tariffs on US consumers, lowering tariffs on food imports including meat, tomatoes, 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
