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Japan's economy has experienced a decline for the initial time in six quarters, mainly driven by falling overseas shipments as a result of newly imposed US tariffs.

G7 Growth Standings

The Japanese economy has become the first Group of Seven nation to disclose an GDP decline in the latest quarter.

With the United States still needing to publish its gross domestic product data for the third quarter, the present G7 growth rankings indicate:

• France: 0.5 percent quarterly growth
• UK: +0.1%
• Canada: +0.1% (provisional estimate)
• Germany: zero growth
• Italian economy: 0%
• Japan: -0.4%

Travel Stocks Slump amid Diplomatic Rift with Beijing

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

Stocks in Japan's tourism and consumer businesses have dropped noticeably after China urged its residents to refrain from traveling to Japan.

This move by Chinese authorities heightened a political dispute that was initiated by statements from Japan's recently appointed prime minister about the potential of sending troops in the case of a potential Chinese invasion on Taiwan.

The development caused a surge of sell-offs across Japanese leisure shares.

• Oriental Land stock dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3 percent
• Japan Airlines fell by 3.75 percent

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

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly at risk."

GDP Decline Details

Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted 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% lower than a year ago.

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

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

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

"The Japanese economic situation was solid in the initial six months 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 gradual growth trend going forward."

The White House has recently recognized the effect of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.

Business Calendar

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