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The Japanese economic system has shown a decline for the first time in a year and a half, primarily driven by weakening overseas shipments due to newly imposed American tariffs.

Group of Seven Economic Standings

Japan stands as the first Group of Seven economy to report an output shrinkage in the previous quarter.

As the US yet to publish its gross domestic product figures for the third quarter, the present G7 economic rankings indicate:

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

Travel Shares Slump during Diplomatic Rift with China

Alongside the economic contraction, Japan is experiencing an growing political conflict with China regarding Taiwan.

Stocks in Japanese travel and consumer firms have declined noticeably after China recommended its nationals to refrain from visiting to Japan.

This decision by Beijing intensified a political dispute that was initiated by comments from Tokyo's recently appointed PM about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.

The situation caused a surge of selling across Japan's tourism-related stocks.

• The Tokyo Disneyland operator shares dropped by 5.7%
• The department store chain tumbled by 11.3%
• Japan Airlines fell by 3.75%

"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan introduces short-term headwinds for retail and hospitality sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality particularly at risk."

Economic Contraction Details

Japan's GDP declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were affected by duties levied by the United States recently.

Exports were a major factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two nations concluded a trade deal.

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

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

"Japan's economy was strong in the first half of this year and the latest GDP figures showed that growth is halted for now.

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

The US administration has recently acknowledged the impact of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, coffee and bananas amid growing concerns about rising costs.

Business Calendar

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