Japan's Economy Declines while Overseas Sales Suffer by American Trade Duties
Japan's economy has experienced a drop for the initial time in a year and a half, mainly caused by falling overseas shipments because of newly imposed US trade duties.
Group of Seven Economic Leaderboard
Japan has become the first Group of Seven nation to report an GDP decline in the previous three-month period.
As the United States yet to publish its gross domestic product figures for the third quarter, the current G7 economic rankings display:
- France: 0.5 percent quarterly growth
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japan: negative 0.4 percent
Travel Shares Decline amid Political Rift with China
Alongside the GDP decline, Japan is experiencing an intensifying political conflict with China concerning Taiwan.
Stocks in Japan's tourism and retail companies have dropped noticeably after China recommended its citizens to avoid visiting to Japan.
This move by Chinese authorities escalated a political dispute that was triggered by comments from Tokyo's recently appointed PM about the potential of deploying forces in the case of a potential Chinese attack on Taiwan.
The development caused a surge of sell-offs across Japan's tourism-related stocks.
- Oriental Land stock dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging travel to Japan introduces short-term headwinds for consumer-facing sectors.
"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality particularly vulnerable."
GDP Contraction Details
Japan's GDP dropped by 0.4 percent in the July-September quarter, as industrial overseas shipments were hit by duties levied by the US recently.
Exports were a major factor of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15% when the two countries concluded a trade deal.
Private demand also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"The Japanese economic situation was solid in the initial six months of this year and the latest GDP figures showed that momentum is paused temporarily.
I expect Japan's economy to be back on a moderate recovery trend going forward."
The White House has recently acknowledged the effect of tariffs on US consumers, lowering duties on food imports including meat, tomatoes, coffee and bananas amid growing concerns about rising costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
