🔗 Share this article

Japan's economy has experienced a decline for the first time in six quarters, mainly driven by falling overseas shipments due to newly imposed American trade duties.

G7 Economic Standings

The Japanese economy stands as the initial Group of Seven nation to report an output shrinkage in the most recent three-month period.

As the US still needing to release its gross domestic product data for the third quarter, the present G7 growth standings display:

• The French economy: +0.5% quarterly growth
• UK: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: 0%
• Japanese economy: -0.4%

Tourism Stocks Slump amid Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is facing an escalating political tension with China concerning Taiwan.

Shares in Japanese travel and consumer companies have fallen sharply after China advised its nationals to avoid visiting to Japan.

This action by Chinese authorities intensified a political dispute that was sparked by statements from Tokyo's new PM about the potential of deploying troops in the case of a potential Chinese attack on Taiwan.

The development caused a surge of sell-offs across Japan's leisure shares.

• The Tokyo Disneyland operator shares dropped by 5.7%
• The department store chain plummeted by 11.3 percent
• The national carrier fell by 3.75 percent

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

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality especially at risk."

Economic Contraction Details

Japan's gross domestic product dropped by 0.4% in the July-September quarter, as industrial exports were impacted by duties imposed by the US recently.

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

Previously, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two countries concluded a trade agreement.

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

On an annualized basis, Japan's GDP contracted by 1.8% in the three months through September.

"The Japanese economic situation was strong in the first half of this year and the latest GDP figures showed that growth is halted for now.

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

The White House has lately recognized the impact of tariffs on US consumers, lowering duties on food imports including beef, produce, coffee and fruits amid growing concerns about increasing costs.

Economic Agenda

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