The Japanese economic system has experienced a drop for the initial time in a year and a half, primarily caused by weakening exports as a result of recent American trade duties.
G7 Economic Rankings
Japan has become the first Group of Seven country to disclose an economic contraction in the most recent three-month period.
With the US yet to publish its GDP figures for the third quarter, the current G7 economic standings show:
- The French economy: 0.5 percent quarterly growth
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- Germany: zero growth
- Italian economy: no growth
- Japan: -0.4%
Travel Stocks Slump amid Diplomatic Rift with China
In addition to the economic contraction, Japan is experiencing an intensifying political dispute with China regarding Taiwan.
Stocks in Japan's travel and consumer businesses have fallen sharply after China advised its residents to refrain from traveling to Japan.
This move by Beijing escalated a diplomatic feud that was triggered by comments from Japan's recently appointed prime minister about the possibility of sending forces in the case of a potential Chinese attack on Taiwan.
The development caused a surge of sell-offs across Japanese leisure shares.
- Oriental Land shares dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier declined by 3.75%
"The ongoing tension over Taiwan and Beijing's advisory advising against travel to Japan creates short-term headwinds for retail and hospitality sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality especially at risk."
GDP Decline Details
Japanese GDP dropped by 0.4% in the July-September quarter, as industrial overseas shipments were impacted by duties levied by the US this year.
Overseas shipments were a key driver of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a new 25% tariff on its products, which was later lowered to 15 percent when the two nations reached a trade deal.
Consumer spending also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"The Japanese economic situation was stable in the first half of this year and the latest GDP figures showed that momentum is paused temporarily.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The White House has recently recognized the effect of tariffs on Americans, reducing tariffs on imported food products including beef, tomatoes, coffee and bananas amid increasing concerns about rising costs.
Business Calendar
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
