Japan's Economic Output Declines as Overseas Sales Face Impact by American Trade Duties
The Japanese economic system has recorded a decline for the first time in six quarters, largely driven by declining overseas shipments because of recent American trade duties.
Group of Seven Growth Rankings
Japan has become the first G7 nation to announce an GDP decline in the most recent quarter.
As the US still needing to publish its GDP figures for the third quarter, the current G7 growth leaderboard show:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japan: negative 0.4 percent
Travel Shares Slump during Political Dispute with China
In addition to the GDP decline, Japan is dealing with an escalating political tension with China regarding Taiwan.
Shares in Japanese travel and retail businesses have declined significantly after China recommended its residents to avoid traveling to Japan.
This decision by Chinese authorities escalated a political dispute that was sparked by comments from Japan's recently appointed PM about the potential of deploying forces in the event of a hypothetical Chinese invasion on Taiwan.
The development led to a wave of sell-offs across Japanese leisure stocks.
- Oriental Land stock fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier fell by 3.75%
"The China-Japan tension over Taiwan and Beijing's travel warning advising against visits to Japan creates short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially at risk."
Economic Contraction Breakdown
Japan's gross domestic product fell by 0.4% in the third quarter, as industrial exports were affected by duties imposed by the US recently.
Overseas shipments were a major factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two nations reached 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 percent in the three months through September.
"Japan's economy was stable in the initial six months of this year and the latest GDP figures showed that growth is paused temporarily.
I expect Japan's economy to be back on a moderate growth trend going forward."
The US administration has lately recognized the effect of tariffs on Americans, lowering tariffs on imported food products including beef, tomatoes, beverages and bananas amid growing 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
