The Japanese Economy Declines as Exports Face Impact by US Trade Duties
Japan's economy has recorded a decline for the first time in a year and a half, mainly caused by declining exports due to recent US tariffs.
Group of Seven Economic Leaderboard
Japan stands as the initial G7 nation to report an output shrinkage in the most recent quarter.
With the US yet to release its GDP data for the third quarter, the present G7 growth rankings display:
- The French economy: 0.5 percent quarterly growth
- UK: 0.1 percent
- Canada: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japanese economy: -0.4%
Travel Stocks Slump during Political Rift with China
Alongside the GDP decline, Japan is facing an intensifying diplomatic conflict with China regarding Taiwan.
Stocks in Japanese tourism and consumer firms have declined noticeably after China urged its residents to refrain from traveling to Japan.
This action by Chinese authorities heightened a diplomatic feud that was initiated by statements from Tokyo's recently appointed prime minister about the possibility of sending forces in the case of a potential Chinese invasion on Taiwan.
The situation triggered a wave of selling across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The ongoing dispute over Taiwan and Beijing's travel warning discouraging travel to Japan introduces near-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially vulnerable."
GDP Decline Breakdown
Japanese gross domestic product fell by 0.4% in the July-September quarter, as manufacturers' overseas shipments were impacted by duties imposed by the United States recently.
Exports were a major factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade agreement.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP contracted by 1.8 percent in the quarter through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP data showed that momentum is paused temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has recently recognized the effect of tariffs on Americans, reducing duties on food imports including meat, tomatoes, coffee and fruits amid increasing concerns about increasing costs.
Business Agenda
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- 15:00 Greenwich Mean Time: US construction spending data for August