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The Japanese economic system has experienced a contraction for the first time in six quarters, mainly caused by falling exports due to newly imposed American tariffs.

Group of Seven Economic Standings

The Japanese economy has become the first Group of Seven economy to disclose an economic contraction in the most recent three-month period.

With the United States still needing to publish its GDP figures for the third quarter, the present G7 growth standings display:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: 0%
• Japanese economy: -0.4%

Travel Shares Slump amid Diplomatic Dispute with China

In addition to the economic contraction, Japan is experiencing an intensifying political tension with China regarding Taiwan.

Stocks in Japanese tourism and retail businesses have declined sharply after China advised its residents to avoid visiting to Japan.

This decision by Chinese authorities intensified a political dispute that was sparked by statements from Tokyo's new PM about the potential of deploying forces in the case of a potential Chinese invasion on Taiwan.

The development triggered a surge of selling across Japanese leisure shares.

• Oriental Land stock fell by 5.7%
• Isetan Mitsukoshi tumbled by 11.3%
• The national carrier declined by 3.75 percent

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

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality especially vulnerable."

Economic Contraction Breakdown

Japan's GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by tariffs levied by the United States recently.

Overseas shipments were a key factor of the decline, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

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

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

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

"The Japanese economic situation was strong in the first half of this year and the latest GDP figures showed that growth is paused temporarily.

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

The US administration has recently acknowledged the impact of tariffs on Americans, lowering duties on imported food products including meat, produce, beverages and bananas amid increasing concerns about increasing costs.

Business Agenda

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