The Japanese Economy Declines as Overseas Sales Are Hit by US Trade Duties
The Japanese economic system has experienced a decline for the initial time in six quarters, mainly caused by weakening exports because of newly imposed US tariffs.
Group of Seven Economic Standings
Japan has become the initial Group of Seven nation to report an economic contraction in the most recent quarter.
As the US still needing to release its gross domestic product figures for the third quarter, the present G7 growth rankings display:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: no growth
- Japan: negative 0.4 percent
Tourism Shares Decline during Political Rift with China
Alongside the economic contraction, Japan is dealing with an growing diplomatic dispute with China concerning Taiwan.
Stocks in Japan's travel and consumer companies have declined significantly after China urged its residents to avoid visiting to Japan.
This move by Beijing heightened a diplomatic feud that was triggered by comments from Tokyo's recently appointed prime minister about the potential of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of sell-offs across Japanese tourism-related stocks.
- Oriental Land stock fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier fell by 3.75 percent
"The ongoing dispute over Taiwan and Beijing's travel warning advising against visits to Japan brings near-term difficulties for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly at risk."
GDP Decline Details
Japanese gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' overseas shipments were impacted by duties imposed by the United States this year.
Exports were a major factor of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the American government had proposed Japan with a new 25% tariff on its goods, which was later reduced to 15% when the two countries reached a trade agreement.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product contracted 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 momentum is paused for now.
I expect Japan's economy to be returning on a moderate growth trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, beverages and bananas amid increasing concerns about rising costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
