The Japanese Economic Output Declines while Overseas Sales Suffer by US Tariffs
The Japanese economic system has recorded a decline for the initial time in a year and a half, mainly driven by weakening exports as a result of recent American tariffs.
G7 Economic Standings
The Japanese economy has become the first G7 nation to disclose an economic contraction in the most recent quarter.
As the US yet to publish its GDP data for the third quarter, the present Group of Seven growth leaderboard indicate:
- France: +0.5% expansion
- United Kingdom: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump amid Political Rift with Beijing
Alongside the GDP decline, Japan is facing an growing diplomatic dispute with China regarding Taiwan.
Stocks in Japan's tourism and consumer firms have dropped sharply after China advised its residents to refrain from traveling to Japan.
This move by Beijing heightened a diplomatic feud that was triggered by comments from Tokyo's new PM about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.
The development triggered a wave of selling across Japan's tourism-related stocks.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain plummeted by 11.3%
- The national carrier fell by 3.75%
"The ongoing dispute over Taiwan and China's advisory advising against travel to Japan introduces short-term challenges for consumer-facing sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly vulnerable."
Economic Decline Breakdown
Japan's GDP fell by 0.4 percent in the July-September quarter, as industrial overseas shipments were hit by tariffs imposed by the United States recently.
Overseas shipments were a key driver of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15 percent when the two nations reached a trade agreement.
Consumer spending also declined, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"Japan's economy was strong in the initial six months of this year and today's GDP figures showed that growth is halted temporarily.
I expect Japan's economy to be back on a gradual growth trend going forward."
The US administration has lately acknowledged the impact of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
