The Japanese Economy Declines while Exports Face Impact by US Tariffs
The Japanese economic system has recorded a decline for the first time in a year and a half, largely driven by declining exports because of recent American trade duties.
G7 Economic Leaderboard
Japan stands as the first Group of Seven country to report an economic contraction in the most recent three-month period.
With the US yet to release its GDP figures for the third quarter, the current Group of Seven economic rankings indicate:
- The French economy: +0.5% expansion
- UK: 0.1 percent
- Canada: 0.1 percent (provisional estimate)
- Germany: 0%
- Italy: 0%
- Japanese economy: negative 0.4 percent
Tourism Stocks Decline amid Political Dispute with China
Alongside the economic contraction, Japan is facing an escalating diplomatic conflict with China regarding Taiwan.
Shares in Japan's tourism and retail firms have fallen significantly after China urged its nationals to avoid visiting to Japan.
This move by Chinese authorities intensified a diplomatic feud that was sparked by comments from Japan's recently appointed prime minister about the possibility of deploying troops in the event of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japan's tourism-related shares.
- Oriental Land stock fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan dispute over Taiwan and China's advisory advising against visits to Japan brings short-term challenges for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly at risk."
GDP Contraction Details
Japanese GDP dropped by 0.4% in the July-September quarter, as industrial overseas shipments were affected by tariffs levied by the United States this year.
Overseas shipments were a primary factor of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two countries concluded a trade deal.
Consumer spending also declined, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's GDP shrank by 1.8 percent in the quarter through September.
"Japan's economy was strong in the first half of this year and today's GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has recently recognized the effect of tariffs on US consumers, reducing duties on food imports including meat, tomatoes, coffee and bananas amid increasing concerns about increasing costs.
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