🔗 Share this article

The Japanese economic system has experienced a decline for the first time in six quarters, primarily caused by falling exports because of newly imposed US tariffs.

Group of Seven Growth Standings

Japan stands as the initial Group of Seven country to disclose an output shrinkage in the latest quarter.

As the United States still needing to publish its GDP figures for the third quarter, the present Group of Seven growth standings display:

• France: 0.5 percent quarterly growth
• UK: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japan: negative 0.4 percent

Tourism Shares Decline during Political Dispute with Beijing

In addition to the economic contraction, Japan is experiencing an intensifying political conflict with China concerning Taiwan.

Stocks in Japan's travel and consumer firms have declined noticeably after China urged its nationals to avoid visiting to Japan.

This decision by Beijing intensified a political dispute that was initiated by comments from Tokyo's new PM about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.

The development caused a surge of selling across Japanese leisure shares.

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

"The China-Japan dispute over Taiwan and China's travel warning advising against travel to Japan brings short-term challenges for retail and hospitality sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."

GDP Contraction Details

Japan's GDP fell by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs imposed by the US recently.

Exports were a major 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 US administration had threatened Japan with a new 25 percent tariff on its products, which was later reduced to 15 percent when the two nations reached a trade agreement.

Private demand also declined, by 0.3% quarter-on-quarter.

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

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

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

The US administration has lately recognized the impact of tariffs on Americans, reducing tariffs on food imports including beef, produce, beverages and bananas amid growing concerns about rising costs.

Business Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August