Japan's Economy Contracts while Exports Suffer by US Trade Duties

The Japanese economic system has shown a decline for the initial time in a year and a half, mainly driven by declining overseas shipments because of recent American tariffs.

G7 Economic Leaderboard

The Japanese economy stands as the initial G7 country to announce an economic contraction in the previous quarter.

As the US still needing to publish its GDP figures for the third quarter, the present G7 growth standings display:

• France: +0.5% quarterly growth
• United Kingdom: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• German economy: 0%
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Stocks Slump during Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is experiencing an growing political conflict with China concerning Taiwan.

Stocks in Japan's tourism and consumer companies have declined significantly after China advised its citizens to avoid visiting to Japan.

This decision by Beijing escalated a political dispute that was triggered by remarks from Tokyo's recently appointed prime minister about the potential of sending troops in the event of a hypothetical Chinese attack on Taiwan.

The development led to a surge of selling across Japanese leisure stocks.

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines fell by 3.75 percent

"The ongoing tension over Taiwan and China's travel warning discouraging visits to Japan creates near-term challenges for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."

GDP Contraction Details

Japan's gross domestic product fell by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were hit by duties imposed by the United States recently.

Overseas shipments were a primary factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Previously, the US administration had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15% when the two nations reached a trade agreement.

Consumer spending also fell, by 0.3% quarter-on-quarter.

On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.

"Japan's economy was stable 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 returning on a gradual recovery trend going forward."

The White House has recently recognized the effect of tariffs on US consumers, reducing duties on imported food products including beef, produce, coffee and fruits amid increasing concerns about increasing costs.

Business Agenda

• 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
• 3pm GMT: US construction spending data for August