🔗 Share this article

The Japanese economic system has shown a contraction for the initial time in six quarters, largely caused by declining overseas shipments as a result of newly imposed US trade duties.

Group of Seven Economic Standings

The Japanese economy has become the initial Group of Seven country to report an GDP decline in the latest three-month period.

As the United States yet to publish its gross domestic product data for the third quarter, the current Group of Seven economic leaderboard indicate:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Tourism Stocks Decline amid Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is dealing with an growing political dispute with China concerning Taiwan.

Shares in Japanese tourism and retail firms have dropped sharply after China advised its citizens to avoid visiting to Japan.

This decision by Chinese authorities heightened a political dispute that was triggered by statements from Japan's new PM about the possibility of deploying forces in the event of a hypothetical Chinese attack on Taiwan.

The situation caused a surge of sell-offs across Japan's leisure stocks.

• Oriental Land stock dropped by 5.7 percent
• The department store chain tumbled by 11.3%
• The national carrier declined by 3.75%

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

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services especially vulnerable."

GDP Decline Breakdown

Japanese GDP declined by 0.4 percent in the third quarter, as industrial overseas shipments were hit by tariffs imposed by the United States this year.

Exports were a primary driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the US administration had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries reached a trade deal.

Private demand also fell, by 0.3 percent quarter-on-quarter.

On an annual basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.

"The Japanese economic situation was solid in the first half of this year and today's GDP figures showed that momentum is paused for now.

I expect Japan's economy to be returning on a moderate recovery trend going forward."

The White House has lately acknowledged the impact of tariffs on Americans, lowering tariffs on imported food products including beef, tomatoes, coffee and bananas amid growing concerns about increasing costs.

Business Agenda

• 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August