The Japanese Economy Shrinks as Overseas Sales Are Hit by American Tariffs
The Japanese economic system has experienced a contraction for the initial time in six quarters, mainly caused by falling exports due to recent American tariffs.
Group of Seven Growth Rankings
Japan has become the initial Group of Seven economy to announce an output shrinkage in the most recent quarter.
With the United States still needing to publish its GDP figures for the third quarter, the present G7 growth leaderboard indicate:
- France: +0.5% quarterly growth
- UK: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: -0.4%
Travel Stocks Decline amid Diplomatic Dispute with Beijing
In addition to the economic contraction, Japan is dealing with an escalating diplomatic conflict with China concerning Taiwan.
Shares in Japanese travel and consumer companies have dropped significantly after China urged its residents to avoid traveling to Japan.
This move by Beijing escalated a political dispute that was triggered by remarks from Tokyo's recently appointed prime minister about the possibility of sending forces in the event of a potential Chinese invasion on Taiwan.
The development led to a wave of sell-offs across Japan's leisure shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier declined by 3.75%
"The China-Japan tension over Taiwan and Beijing's advisory discouraging travel to Japan creates near-term difficulties for retail and hospitality sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."
Economic Contraction Breakdown
Japan's gross domestic product declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were impacted by duties levied by the US this year.
Overseas shipments were a key factor of the decline, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.
Earlier this year, the US administration had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15% when the two countries reached a trade deal.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the quarter through September.
"The Japanese economic situation was stable in the first half of this year and the latest GDP figures showed that growth is paused temporarily.
I anticipate Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has lately acknowledged the effect of tariffs on US consumers, lowering duties on imported food products including beef, produce, beverages and fruits amid increasing concerns about rising costs.
Business Calendar
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
