🔗 Share this article

Japan's economy has shown a decline for the first time in six quarters, mainly driven by declining exports due to newly imposed American trade duties.

Group of Seven Growth Leaderboard

The Japanese economy stands as the first G7 nation to announce an GDP decline in the most recent quarter.

With the United States yet to release its GDP figures for the third quarter, the present Group of Seven growth rankings indicate:

• France: +0.5% quarterly growth
• UK: +0.1%
• Canada: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japanese economy: negative 0.4 percent

Travel Shares Decline amid Diplomatic Rift with Beijing

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

Stocks in Japanese travel and retail companies have fallen significantly after China recommended its residents to avoid traveling to Japan.

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

The development triggered a wave of sell-offs across Japanese leisure shares.

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

"The China-Japan dispute over Taiwan and China's travel warning discouraging visits to Japan creates short-term challenges for retail and hospitality sectors.

"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services especially vulnerable."

GDP Contraction Details

Japan's GDP declined by 0.4 percent in the July-September quarter, as manufacturers' exports were affected by duties imposed by the United States this year.

Exports were a primary driver of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

Previously, the American government had threatened Japan with a new 25 percent tariff on its products, which was later lowered to 15% when the two nations concluded a trade agreement.

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

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

"The Japanese economic situation was strong in the first half of this year and today's GDP data showed that growth is halted temporarily.

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

The White House has lately recognized the effect of tariffs on Americans, reducing tariffs on food imports including beef, tomatoes, beverages and bananas amid increasing concerns about rising costs.

Economic Agenda

• 8am GMT: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August