Japan's Economy Shrinks while Exports Face Impact by US Tariffs
The Japanese economic system has experienced a contraction for the initial time in a year and a half, mainly driven by weakening exports due to recent US tariffs.
G7 Economic Standings
Japan has become the initial G7 nation to disclose an GDP decline in the most recent three-month period.
As the United States still needing to release its gross domestic product data for the third quarter, the present G7 economic rankings indicate:
- France: +0.5% quarterly growth
- United Kingdom: 0.1 percent
- Canada: +0.1% (provisional estimate)
- Germany: zero growth
- Italian economy: 0%
- Japanese economy: -0.4%
Travel Shares Decline during Diplomatic Dispute with Beijing
Alongside the economic contraction, Japan is dealing with an intensifying diplomatic dispute with China concerning Taiwan.
Shares in Japanese tourism and consumer companies have dropped sharply after China urged its nationals to refrain from visiting to Japan.
This move by Chinese authorities heightened a political dispute that was triggered by comments from Japan's recently appointed PM about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.
The development led to a wave of sell-offs across Japanese leisure shares.
- The Tokyo Disneyland operator shares fell by 5.7 percent
- The department store chain plummeted by 11.3 percent
- The national carrier fell by 3.75%
"The China-Japan tension over Taiwan and China's travel warning advising against visits to Japan creates short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly vulnerable."
GDP Contraction Breakdown
Japanese GDP dropped by 0.4 percent in the third quarter, as manufacturers' exports were hit by tariffs imposed by the US this year.
Overseas shipments were a key driver of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Previously, the American government had proposed Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade deal.
Consumer spending also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank 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 for now.
I anticipate Japan's economy to be back on a moderate growth trend going forward."
The White House has lately acknowledged the effect of tariffs on US consumers, lowering tariffs on food imports including meat, produce, beverages and fruits amid growing concerns about increasing costs.
Business Calendar
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
