🔗 Share this article

The Japanese economic system has shown a decline for the first time in a year and a half, mainly driven by falling exports because of newly imposed US trade duties.

G7 Economic Rankings

The Japanese economy has become the first G7 economy to disclose an GDP decline in the latest quarter.

As the United States still needing to publish its gross domestic product figures for the third quarter, the present Group of Seven economic standings display:

• France: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canadian economy: +0.1% (provisional estimate)
• German economy: 0%
• Italian economy: no growth
• Japan: negative 0.4 percent

Tourism Shares Slump amid Political Dispute with China

Alongside the GDP decline, Japan is dealing with an escalating diplomatic conflict with China regarding Taiwan.

Stocks in Japanese travel and retail businesses have dropped noticeably after China urged its residents to refrain from visiting to Japan.

This move by Beijing heightened a diplomatic feud that was initiated by statements from Tokyo's recently appointed PM about the possibility of deploying forces in the event of a potential Chinese attack on Taiwan.

The situation triggered a wave of selling across Japanese leisure stocks.

• The Tokyo Disneyland operator stock fell by 5.7%
• The department store chain tumbled by 11.3 percent
• The national carrier declined by 3.75%

"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan brings short-term difficulties for retail and hospitality sectors.

"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and hospitality especially vulnerable."

GDP Contraction Details

Japan's gross domestic product declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were impacted by duties levied by the United States recently.

Overseas shipments were a major factor of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.

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

Consumer spending also declined, by 0.3% compared to the previous quarter.

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

"Japan's economy was stable in the initial six months of this year and the latest GDP data showed that momentum is halted temporarily.

I anticipate Japan's economy to be returning on a gradual growth trend going forward."

The US administration has recently recognized the effect of tariffs on Americans, lowering tariffs on imported food products including meat, tomatoes, coffee and bananas amid growing concerns about increasing costs.

Business Agenda

• 8am GMT: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August