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The Japanese economic system has experienced a contraction for the initial time in six quarters, primarily caused by weakening exports because of newly imposed American trade duties.

G7 Economic Leaderboard

Japan stands as the initial G7 economy to disclose an economic contraction in the latest quarter.

As the US still needing to release its GDP data for the third quarter, the present Group of Seven economic leaderboard indicate:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: negative 0.4 percent

Tourism Stocks Decline during Political Dispute with Beijing

In addition to the GDP decline, Japan is experiencing an intensifying diplomatic tension with China concerning Taiwan.

Shares in Japanese tourism and retail firms have fallen noticeably after China urged its residents to avoid traveling to Japan.

This move by Chinese authorities escalated a diplomatic feud that was triggered by comments from Japan's recently appointed prime minister about the possibility of deploying troops in the case of a potential Chinese invasion on Taiwan.

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

• Oriental Land shares dropped by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines declined by 3.75 percent

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

"Tourists from China represent roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality especially at risk."

Economic Decline Breakdown

Japan's GDP declined by 0.4% in the third quarter, as manufacturers' exports were hit by tariffs imposed by the US recently.

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

Earlier this year, the US administration had proposed Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two countries concluded a trade agreement.

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

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

"The Japanese economic situation was stable in the initial six months of this year and today's GDP data showed that growth is halted for now.

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

The White House has lately recognized the impact of tariffs on US consumers, lowering tariffs on imported food products including beef, tomatoes, coffee and fruits amid growing concerns about increasing costs.

Business Calendar

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