Japan's Economic Output Declines as Overseas Sales Are Hit by US Tariffs
The Japanese economic system has experienced a drop for the initial time in six quarters, primarily caused by declining exports due to newly imposed US tariffs.
G7 Economic Leaderboard
Japan has become the first Group of Seven economy to disclose an GDP decline in the most recent quarter.
With the United States still needing to publish its gross domestic product data for the third quarter, the present G7 growth standings display:
- France: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- German economy: 0%
- Italy: 0%
- Japan: -0.4%
Travel Stocks Decline during Diplomatic Rift with China
Alongside the GDP decline, Japan is dealing with an growing diplomatic tension with China regarding Taiwan.
Shares in Japan's travel and retail firms have dropped noticeably after China recommended its citizens to avoid traveling to Japan.
This move by Beijing intensified a political dispute that was triggered by remarks from Tokyo's new PM about the potential of deploying forces in the event of a hypothetical Chinese attack on Taiwan.
The situation caused a surge of selling across Japan's leisure shares.
- The Tokyo Disneyland operator shares fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines fell by 3.75%
"The ongoing tension over Taiwan and Beijing's advisory discouraging travel to Japan introduces near-term headwinds for retail and hospitality sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."
GDP Contraction Breakdown
Japan's GDP dropped by 0.4% in the July-September quarter, as industrial exports were affected by duties imposed by the US recently.
Exports were a major driver of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Previously, the US administration had threatened Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade agreement.
Consumer spending also declined, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.
"Japan's economy was strong in the initial six months of this year and today's GDP figures showed that momentum is halted for now.
I anticipate Japan's economy to be returning on a moderate growth trend going forward."
The US administration has lately recognized the effect of tariffs on US consumers, reducing tariffs on food imports including meat, tomatoes, coffee and bananas amid increasing concerns about increasing costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
