🔗 Share this article

The Japanese economic system has recorded a decline for the initial time in a year and a half, largely caused by falling exports as a result of recent American tariffs.

G7 Growth Leaderboard

The Japanese economy stands as the first Group of Seven country to report an GDP decline in the most recent three-month period.

With the United States still needing to release its gross domestic product figures for the third quarter, the present Group of Seven growth leaderboard display:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: 0%
• Japan: -0.4%

Tourism Shares Slump during Political Dispute with Beijing

Alongside the GDP decline, Japan is experiencing an growing political conflict with China concerning Taiwan.

Stocks in Japan's travel and retail firms have dropped noticeably after China advised its citizens to avoid traveling to Japan.

This decision by Beijing intensified a diplomatic feud that was triggered by statements from Japan's new prime minister about the possibility of deploying troops in the event of a potential Chinese invasion on Taiwan.

The development caused a surge of selling across Japanese tourism-related shares.

• Oriental Land shares dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier declined by 3.75 percent

"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging travel to Japan brings near-term headwinds for retail and hospitality sectors.

"Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially vulnerable."

Economic Decline Details

Japanese GDP fell by 0.4% in the July-September quarter, as manufacturers' exports were affected by tariffs imposed by the US recently.

Exports were a major driver of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Previously, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade agreement.

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

On an annual basis, Japan's GDP shrank by 1.8 percent in the quarter through September.

"Japan's economy was strong in the first half of this year and today's GDP figures showed that momentum is paused for now.

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

The White House has lately acknowledged the effect of tariffs on US consumers, reducing duties on food imports including meat, produce, coffee and fruits amid growing concerns about increasing costs.

Economic Calendar

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