Japan's Economy Declines as Overseas Sales Suffer by American Trade Duties
Japan's economy has experienced a drop for the initial time in a year and a half, primarily caused by declining overseas shipments as a result of newly imposed American trade duties.
Group of Seven Economic Rankings
Japan stands as the first G7 country to announce an economic contraction in the latest three-month period.
As the United States still needing to publish its GDP data for the third quarter, the present Group of Seven growth standings show:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canada: 0.1 percent (preliminary figure)
- German economy: 0%
- Italy: no growth
- Japan: negative 0.4 percent
Travel Stocks Slump amid Political Dispute with Beijing
Alongside the GDP decline, Japan is experiencing an growing political conflict with China regarding Taiwan.
Stocks in Japan's tourism and consumer companies have dropped significantly after China recommended its nationals to refrain from traveling to Japan.
This action by Chinese authorities escalated a political dispute that was initiated by comments from Japan's new PM about the possibility of sending forces in the case of a potential Chinese invasion on Taiwan.
The situation caused a surge of selling across Japan's tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7%
- The department store chain tumbled by 11.3 percent
- The national carrier declined by 3.75 percent
"The China-Japan dispute over Taiwan and Beijing's travel warning advising against visits to Japan creates near-term headwinds for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly vulnerable."
GDP Contraction Details
Japan's gross domestic product dropped by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the US recently.
Overseas shipments were a major driver 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 percent tariff on its products, which was later lowered to 15 percent when the two countries concluded a trade deal.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8% in the three months through September.
"Japan's economy was strong in the first half of this year and the latest GDP figures showed that growth is halted for now.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has recently recognized the effect of tariffs on Americans, reducing duties on imported food products including beef, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
