The Japanese Economic Output Contracts as Exports Suffer by US Tariffs
The Japanese economic system has experienced a drop for the initial time in a year and a half, mainly caused by declining overseas shipments because of recent American tariffs.
Group of Seven Economic Standings
Japan stands as the initial G7 country to disclose an output shrinkage in the latest three-month period.
With the US still needing to publish its GDP figures for the third quarter, the present G7 economic standings show:
- France: 0.5 percent expansion
- UK: 0.1 percent
- Canada: +0.1% (provisional estimate)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Travel Stocks Slump amid Diplomatic Dispute with Beijing
Alongside the economic contraction, Japan is experiencing an intensifying diplomatic dispute with China concerning Taiwan.
Stocks in Japan's tourism and consumer companies have dropped sharply after China recommended its residents to avoid visiting to Japan.
This move by Beijing intensified a political dispute that was initiated by comments from Japan's recently appointed PM about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japanese tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3%
- Japan Airlines fell by 3.75%
"The ongoing dispute over Taiwan and Beijing's advisory advising against travel to Japan introduces short-term challenges for consumer-facing sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services particularly vulnerable."
GDP Contraction Details
Japanese gross domestic product dropped by 0.4% in the July-September quarter, as industrial exports were impacted by tariffs levied by the US recently.
Exports were a key driver of the decline, falling by 1.2% 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 threatened Japan with a new 25% tariff on its goods, which was later lowered to 15 percent when the two countries reached a trade deal.
Private demand also fell, by 0.3% compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8% in the quarter through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP data showed that growth is halted for now.
I anticipate Japan's economy to be returning on a moderate recovery trend going forward."
The US administration has recently recognized the impact of tariffs on US consumers, lowering duties on imported food products including meat, produce, coffee and fruits amid increasing concerns about rising costs.
Business Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
