🔗 Share this article

The Japanese economic system has experienced a drop for the initial time in a year and a half, mainly caused by declining exports due to recent American trade duties.

Group of Seven Growth Standings

The Japanese economy stands as the first Group of Seven nation to announce an GDP decline in the most recent quarter.

With the United States still needing to publish its gross domestic product data for the third quarter, the present Group of Seven growth standings display:

• France: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Tourism Stocks Slump amid Political Dispute with China

Alongside the GDP decline, Japan is dealing with an escalating political dispute with China regarding Taiwan.

Shares in Japan's tourism and consumer businesses have fallen sharply after China recommended its residents to refrain from traveling to Japan.

This action by Beijing intensified a diplomatic feud that was initiated by comments from Tokyo's recently appointed prime minister about the potential of sending forces in the case of a hypothetical Chinese attack on Taiwan.

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

• The Tokyo Disneyland operator shares fell by 5.7 percent
• The department store chain plummeted by 11.3%
• Japan Airlines declined by 3.75 percent

"The China-Japan tension over Taiwan and China's travel warning advising against visits to Japan brings short-term headwinds for consumer-facing sectors.

"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."

GDP Decline Breakdown

Japan's GDP declined by 0.4 percent in the July-September quarter, as industrial exports were hit by tariffs imposed by the United States recently.

Overseas shipments were a primary driver of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two nations concluded a trade deal.

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

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

"Japan's economy was solid in the initial six months of this year and today's GDP figures showed that growth is paused temporarily.

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

The White House has recently acknowledged the impact of tariffs on Americans, reducing tariffs on imported food products including beef, tomatoes, beverages and fruits amid increasing concerns about rising costs.

Business Calendar

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