Japan's Economy Contracts while Exports Suffer by US Tariffs
Japan's economy has experienced a contraction for the initial time in a year and a half, largely caused by falling overseas shipments because of newly imposed American trade duties.
Group of Seven Growth Standings
Japan stands as the first Group of Seven nation to report an output shrinkage in the latest quarter.
As the US still needing to release its gross domestic product data for the third quarter, the present Group of Seven economic rankings indicate:
- France: +0.5% quarterly growth
- UK: 0.1 percent
- Canada: 0.1 percent (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Travel Stocks Slump during Political Dispute with China
In addition to the GDP decline, Japan is experiencing an escalating political tension with China regarding Taiwan.
Stocks in Japan's tourism and consumer firms have dropped noticeably after China recommended its residents to avoid visiting to Japan.
This decision by Beijing intensified a political dispute that was sparked by comments from Japan's recently appointed PM about the potential of deploying troops in the case of a hypothetical Chinese attack on Taiwan.
The development triggered a surge of selling across Japanese tourism-related stocks.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines fell by 3.75%
"The China-Japan tension over Taiwan and China's advisory advising against travel to Japan creates near-term headwinds for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly at risk."
Economic Contraction Details
Japan's GDP declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the US recently.
Overseas shipments were a major factor of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15 percent when the two countries concluded a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP figures showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has recently recognized the impact of tariffs on US consumers, lowering duties on food imports including meat, produce, coffee and bananas amid increasing concerns about increasing costs.
Economic Agenda
- 8am GMT: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
