Japan's Economy Declines as Exports Suffer by American Trade Duties
Japan's economy has shown a contraction for the first time in a year and a half, mainly caused by falling overseas shipments because of recent US tariffs.
Group of Seven Growth Rankings
Japan has become the first Group of Seven nation to report an economic contraction in the latest three-month period.
As the United States yet to release its GDP figures for the third quarter, the present G7 economic rankings display:
- France: 0.5 percent expansion
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- German economy: zero growth
- Italian economy: no growth
- Japan: negative 0.4 percent
Travel Shares Decline during Diplomatic Rift with Beijing
In addition to the GDP decline, Japan is experiencing an growing diplomatic conflict with China concerning Taiwan.
Shares in Japan's tourism and retail firms have declined noticeably after China recommended its citizens to avoid traveling to Japan.
This decision by Beijing heightened a diplomatic feud that was sparked by remarks from Japan's recently appointed PM about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation triggered a wave of selling across Japan's tourism-related stocks.
- Oriental Land shares fell by 5.7 percent
- The department store chain plummeted by 11.3%
- Japan Airlines fell by 3.75%
"The ongoing dispute over Taiwan and Beijing's advisory discouraging travel to Japan creates short-term headwinds for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, luxury retail, and tourism services particularly vulnerable."
Economic Decline Details
Japan's GDP dropped by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by tariffs levied by the United States this year.
Exports were a major factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.
Earlier this year, the American government had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade deal.
Private demand also declined, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8% in the three months through September.
"The Japanese economic situation was stable in the initial six months of this year and today's GDP data showed that growth is halted temporarily.
I anticipate Japan's economy to be returning on a moderate recovery trend going forward."
The White House has lately acknowledged the effect of tariffs on Americans, reducing tariffs on food imports including meat, produce, coffee and bananas amid increasing concerns about rising costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
