Japan's Economy Shrinks as Exports Suffer by US Tariffs
Japan's economy has shown a contraction for the first time in six quarters, primarily caused by falling exports because of recent American tariffs.
Group of Seven Growth Leaderboard
Japan stands as the initial Group of Seven country to report an output shrinkage in the most recent quarter.
With the US still needing to release its GDP data for the third quarter, the current G7 economic standings indicate:
- France: +0.5% expansion
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Tourism Shares Slump amid Diplomatic Dispute with Beijing
Alongside the GDP decline, Japan is dealing with an growing political tension with China regarding Taiwan.
Shares in Japanese tourism and retail companies have dropped noticeably after China recommended its nationals to refrain from visiting to Japan.
This decision by Beijing heightened a political dispute that was sparked by comments from Japan's new PM about the potential of deploying forces in the case of a potential Chinese attack on Taiwan.
The situation caused a surge of selling across Japan's tourism-related shares.
- The Tokyo Disneyland operator shares fell by 5.7 percent
- The department store chain tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and China's travel warning advising against travel to Japan introduces short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality especially vulnerable."
Economic Decline Details
Japanese gross domestic product dropped by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by tariffs levied by the US recently.
Exports were a key driver of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a additional 25 percent tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"Japan's economy was stable in the initial six months of this year and today's GDP data showed that momentum is paused for now.
I expect Japan's economy to be back on a moderate recovery trend going forward."
The White House has lately acknowledged the effect of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, coffee and fruits amid growing concerns about increasing costs.
Business Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
