Japan's Economic Output Declines while Overseas Sales Face Impact by American Trade Duties

The Japanese economic system has recorded a decline for the first time in six quarters, primarily driven by declining overseas shipments due to recent American trade duties.

G7 Economic Rankings

The Japanese economy stands as the initial Group of Seven economy to disclose an GDP decline in the previous quarter.

With the US yet to release its GDP data for the third quarter, the current Group of Seven economic standings show:

France: 0.5 percent quarterly growth
United Kingdom: +0.1%
Canadian economy: +0.1% (preliminary figure)
German economy: 0%
Italy: no growth
Japan: negative 0.4 percent

Tourism Stocks Slump amid Political Dispute with China

Alongside the economic contraction, Japan is dealing with an growing diplomatic dispute with China concerning Taiwan.

Stocks in Japan's travel and retail businesses have fallen significantly after China urged its nationals to avoid traveling to Japan.

This decision by Beijing escalated a political dispute that was sparked by remarks from Japan's recently appointed PM about the potential of sending troops in the case of a hypothetical Chinese attack on Taiwan.

The situation triggered a wave of sell-offs across Japanese tourism-related shares.

Oriental Land shares dropped by 5.7%
Isetan Mitsukoshi plummeted by 11.3%
Japan Airlines declined by 3.75 percent

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

"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly at risk."

Economic Decline Breakdown

Japan's GDP declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs imposed by the United States this year.

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

Previously, the US administration had proposed Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two nations reached a trade agreement.

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

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

"The Japanese economic situation was strong in the initial six months of this year and the latest GDP data showed that momentum is halted for now.

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

The US administration has lately acknowledged the impact of tariffs on Americans, lowering tariffs on imported food products including beef, tomatoes, coffee and bananas amid growing concerns about increasing costs.