Japan's Economic Output Declines as Overseas Sales Face Impact by US Trade Duties
The Japanese economic system has recorded a contraction for the first time in six quarters, mainly driven by weakening overseas shipments as a result of newly imposed American trade duties.
Group of Seven Economic Rankings
The Japanese economy has become the first Group of Seven nation to announce an GDP decline in the previous quarter.
With the United States yet to publish its GDP figures for the third quarter, the current Group of Seven economic standings display:
- France: 0.5 percent quarterly growth
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- Germany: zero growth
- Italian economy: 0%
- Japanese economy: negative 0.4 percent
Travel Shares Decline during Political Rift with China
Alongside the GDP decline, Japan is facing an intensifying diplomatic conflict with China concerning Taiwan.
Stocks in Japanese tourism and consumer firms have dropped sharply after China advised its citizens to refrain from traveling to Japan.
This action by Beijing escalated a political dispute that was triggered by statements from Tokyo's recently appointed PM about the possibility of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The situation triggered a wave of selling across Japan's leisure stocks.
- Oriental Land stock fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier declined by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory discouraging travel to Japan brings near-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services especially vulnerable."
Economic Decline Breakdown
Japan's gross domestic product declined by 0.4% in the July-September quarter, as industrial exports were affected by duties levied by the US recently.
Overseas shipments were a key driver of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.
Earlier this year, the American government had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries reached a trade agreement.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"The Japanese economic situation was solid in the initial six months 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 growth trend going forward."
The US administration has lately acknowledged the impact of tariffs on US consumers, lowering duties on food imports including beef, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
