Japan's Economy Declines while Overseas Sales Suffer by American Tariffs
The Japanese economic system has shown a decline for the initial time in six quarters, mainly caused by declining overseas shipments because of newly imposed US tariffs.
Group of Seven Economic Leaderboard
The Japanese economy has become the first Group of Seven nation to disclose an economic contraction in the previous quarter.
As the United States still needing to release its gross domestic product data for the third quarter, the present Group of Seven economic rankings display:
- The French economy: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- German economy: zero growth
- Italian economy: no growth
- Japan: -0.4%
Travel Stocks Slump amid Political Rift with China
In addition to the economic contraction, Japan is facing an intensifying political dispute with China regarding Taiwan.
Stocks in Japanese tourism and consumer firms have fallen noticeably after China recommended its residents to avoid traveling to Japan.
This move by Beijing heightened a diplomatic feud that was sparked by comments from Tokyo's new prime minister about the possibility of sending forces in the case of a potential Chinese attack on Taiwan.
The development caused a surge of selling across Japanese tourism-related shares.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines declined by 3.75%
"The ongoing tension over Taiwan and China's advisory discouraging travel to Japan introduces near-term difficulties for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially vulnerable."
Economic Contraction Breakdown
Japan's GDP fell by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties levied by the US this year.
Exports were a major driver of the contraction, 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 proposed Japan with a additional 25% tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade agreement.
Private demand also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"Japan's economy was solid in the first half of this year and the latest GDP data showed that momentum is halted for now.
I expect Japan's economy to be returning on a moderate recovery trend going forward."
The White House has recently recognized the impact of tariffs on US consumers, reducing tariffs on food imports including beef, tomatoes, coffee and fruits amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
