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Japan's economy has experienced a decline for the initial time in a year and a half, mainly driven by declining overseas shipments as a result of newly imposed American trade duties.

Group of Seven Economic Rankings

The Japanese economy has become the initial G7 economy to announce an GDP decline in the most recent three-month period.

As the United States yet to publish its GDP data for the third quarter, the current G7 economic leaderboard indicate:

• France: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: 0%
• Italian economy: 0%
• Japan: negative 0.4 percent

Travel Shares Slump during Diplomatic Dispute with Beijing

Alongside the economic contraction, Japan is facing an intensifying political tension with China concerning Taiwan.

Shares in Japan's tourism and retail companies have fallen noticeably after China advised its residents to refrain from traveling to Japan.

This action by Beijing intensified a diplomatic feud that was initiated by comments from Japan's recently appointed prime minister about the potential of deploying troops in the event of a hypothetical Chinese attack on Taiwan.

The situation led to a surge of sell-offs across Japanese tourism-related stocks.

• The Tokyo Disneyland operator stock dropped by 5.7%
• The department store chain tumbled by 11.3 percent
• The national carrier fell by 3.75 percent

"The ongoing tension over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term headwinds for consumer-facing sectors.

"Tourists from China represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly at risk."

Economic Decline Details

Japan's gross domestic product dropped by 0.4% in the third quarter, as industrial exports were impacted by tariffs imposed by the United States recently.

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

Previously, the American government had proposed Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two countries concluded a trade deal.

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

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

"The Japanese economic situation was strong in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.

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

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

Business Agenda

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