🔗 Share this article

The Japanese economic system has recorded a drop for the initial time in a year and a half, mainly driven by declining exports as a result of newly imposed US tariffs.

Group of Seven Economic Standings

Japan stands as the initial G7 country to announce an GDP decline in the most recent three-month period.

With the US still needing to release its gross domestic product data for the third quarter, the current G7 growth leaderboard display:

• France: +0.5% quarterly growth
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: 0%
• Italian economy: no growth
• Japanese economy: -0.4%

Tourism Shares Decline amid Political Rift with China

In addition to the GDP decline, Japan is experiencing an intensifying political conflict with China regarding Taiwan.

Shares in Japanese travel and retail firms have dropped noticeably after China recommended its nationals to avoid visiting to Japan.

This decision by Beijing heightened a political dispute that was sparked by statements from Tokyo's new prime minister about the potential of sending forces in the case of a potential Chinese invasion on Taiwan.

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

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines fell by 3.75 percent

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

"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."

Economic Decline Breakdown

Japan's gross domestic product fell by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted by tariffs levied by the US recently.

Exports were a primary factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.

Previously, the US administration had proposed Japan with a new 25% tariff on its products, which was later lowered to 15% when the two nations concluded a trade deal.

Private demand also declined, by 0.3% compared to the previous quarter.

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

"The Japanese economic situation was strong in the initial six months of this year and today's 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 US administration has lately acknowledged the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, produce, coffee and fruits amid growing concerns about rising costs.

Economic Agenda

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