The Japanese Economic Output Declines as Overseas Sales Suffer by American Trade Duties
The Japanese economic system has shown a decline for the initial time in a year and a half, largely driven by weakening overseas shipments as a result of recent US tariffs.
Group of Seven Economic Rankings
The Japanese economy stands as the initial Group of Seven nation to announce an output shrinkage in the latest three-month period.
As the United States still needing to publish its gross domestic product figures for the third quarter, the current Group of Seven economic rankings display:
- The French economy: +0.5% quarterly growth
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Travel Shares Decline amid Political Dispute with Beijing
Alongside the GDP decline, Japan is dealing with an intensifying diplomatic tension with China concerning Taiwan.
Stocks in Japan's tourism and consumer companies have declined sharply after China advised its citizens to refrain from traveling to Japan.
This move by Chinese authorities escalated a political dispute that was sparked by remarks from Japan's new prime minister about the possibility of deploying forces in the event of a potential Chinese attack on Taiwan.
The situation caused a wave of sell-offs across Japanese leisure shares.
- Oriental Land stock fell by 5.7 percent
- The department store chain plummeted by 11.3%
- The national carrier fell by 3.75%
"The China-Japan tension over Taiwan and China's advisory advising against visits to Japan brings short-term difficulties for consumer-facing sectors.
"Chinese visitors account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and hospitality particularly at risk."
GDP Decline Details
Japan's gross domestic product declined by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the United States recently.
Overseas shipments were a key driver of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries concluded 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 quarter through September.
"The Japanese economic situation was solid in the first half of this year and today's GDP data showed that momentum is halted for now.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has recently recognized the impact of tariffs on Americans, lowering duties on food imports including beef, produce, coffee and fruits amid increasing concerns about increasing costs.
Economic Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
