Japan's Economic Output Shrinks while Overseas Sales Suffer by American Tariffs

The Japanese economic system has recorded a drop for the initial time in six quarters, largely driven by declining overseas shipments because of recent US tariffs.

Group of Seven Economic Leaderboard

The Japanese economy has become the initial G7 nation to disclose an output shrinkage in the most recent quarter.

With the US yet to release its gross domestic product data for the third quarter, the present Group of Seven economic rankings display:

• The French economy: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: 0%
• Japanese economy: -0.4%

Travel Shares Slump amid Political Dispute with Beijing

Alongside the GDP decline, Japan is facing an growing diplomatic tension with China concerning Taiwan.

Stocks in Japanese travel and retail firms have fallen noticeably after China urged its residents to avoid visiting to Japan.

This move by Chinese authorities intensified a diplomatic feud that was initiated by remarks from Japan's new prime minister about the possibility of deploying troops in the event of a potential Chinese attack on Taiwan.

The situation triggered a surge of selling across Japan's leisure shares.

• The Tokyo Disneyland operator shares dropped by 5.7%
• Isetan Mitsukoshi plummeted by 11.3 percent
• The national carrier fell by 3.75 percent

"The ongoing tension over Taiwan and China's advisory advising against travel to Japan creates near-term challenges for consumer-facing sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."

Economic Contraction Breakdown

Japan's GDP declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were hit by duties imposed by the US recently.

Overseas shipments were a key factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.

Earlier this year, the American government had proposed Japan with a new 25 percent tariff on its goods, which was later reduced to 15% when the two countries concluded a trade deal.

Consumer spending also fell, by 0.3% 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 strong in the first half of this year and today's GDP figures showed that growth is halted for now.

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

The White House has lately acknowledged the impact of tariffs on US consumers, reducing duties on imported food products including meat, produce, beverages and bananas amid growing concerns about rising costs.

Economic Calendar

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