The Japanese Economic Output Shrinks as Overseas Sales Face Impact by American Tariffs
The Japanese economic system has shown a drop for the initial time in six quarters, mainly caused by weakening overseas shipments due to recent US tariffs.
Group of Seven Growth Standings
The Japanese economy stands as the first G7 country to report an output shrinkage in the previous three-month period.
As the US still needing to publish its GDP figures for the third quarter, the present G7 economic standings show:
- The French economy: +0.5% quarterly growth
- UK: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Decline during Diplomatic Rift with China
Alongside the economic contraction, Japan is dealing with an growing political conflict with China regarding Taiwan.
Shares in Japan's travel and consumer companies have dropped noticeably after China advised its nationals to avoid visiting to Japan.
This decision by Beijing escalated a diplomatic feud that was triggered by comments from Tokyo's recently appointed PM about the possibility of deploying troops in the case of a potential Chinese attack on Taiwan.
The development caused a surge of sell-offs across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- Japan Airlines declined by 3.75 percent
"The China-Japan dispute over Taiwan and China's travel warning discouraging visits to Japan brings short-term difficulties for consumer-facing sectors.
"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."
GDP Contraction Details
Japanese gross domestic product dropped by 0.4% in the third quarter, as industrial exports were impacted by tariffs imposed by the US this year.
Exports were a key factor of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Previously, the American government had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries reached a trade deal.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's GDP contracted by 1.8% in the three months through September.
"Japan's economy was solid 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 back on a gradual growth trend going forward."
The White House has lately recognized the impact of tariffs on US consumers, lowering duties on imported food products including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.
Economic Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
