TOKYO, Nov 19 (NNN-NHK) – Japanese media and experts are concerned that the fallout from Prime Minister, Sanae Takaichi’s wrongful remarks on Taiwan is spilling over into the already struggling Japanese economy, and the deterioration of Japan-China relations, may lead to a negative economic growth in the fourth quarter.
Recently, Takaichi said in a Diet meeting that, the Chinese mainland’s “use of force on Taiwan” could constitute a “survival-threatening situation” for Japan, implying the possibility of Japan’s armed intervention in the Taiwan Straits.
Tokyo stocks extended losses on Monday, as tensions between Japan and China hit retail and tourism issues. On the stock market, major department stores and air transport issues fell, as investors worried that worsening Japan-China relations would lead to a drop in inbound tourists.
By the close of trading on Monday, shares of department store operator, Mitsukoshi Isetan, plummeted by 11.31 percent, and Takashimaya went down 6.18 percent. Japanese cosmetics giant Shiseido Co., heavily reliant on Chinese tourist spending, saw its shares drop nine percent. Meanwhile, Tokyo Disney Resort operator, Oriental Land, closed down 5.68 percent.
Japanese tourism and retail-related stocks, such as Japan Airlines, All Nippon Airways and Shiseido continued to slump after the market opened yesterday.
The declines come, after Beijing warned students planning to study in Japan of heightened risks for Chinese citizens in the country.
Kohei Onishi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, noted that, the Chinese government issued a travel and study alert for its citizens considering going to Japan, leading investors to anticipate that, the performance of related companies would be affected, and thus prompting them to quickly sell off related stocks.
According to the Japan National Tourism Organisation, overseas visitors spent a record 6.92 trillion yen (about 44.6 billion U.S. dollars) in Japan, from Jan to Sept this year, with tourists from the Chinese mainland and Hong Kong contributing about 30 percent of that.
Takahide Kiuchi, a researcher at Nomura Research Institute, predicts that, the Chinese government’s travel advisory may reduce Japan’s tourism revenue by approximately 2.2 trillion yen over the next year, dragging down Japan’s real gross domestic product by 0.36 percent.
Analysts pointed out that, in the Tokyo stock market, not only did tourism-related stocks, which had previously benefited from inbound tourism, experience overall declines, but the downward trend also spread to Chinese market-related stocks, such as Sushiro, a fast-growing restaurant chain in China, and Ryohin Keikaku, the parent company of MUJI.
Tomoichiro Kubota, senior market analyst at Matsui Securities, said that, investor concerns about deteriorating Japan-China relations have led to a sell-off that appears to have spread to all stocks related to business in China. Some experts said that, Takaichi’s refusal to retract her erroneous remarks prompted investors to take hedging strategies.
According to Takahiro Kazehaya, senior analyst at UBS Securities, market trends indicate that, investors are not only worried about the impact on Chinese tourists’ spending in Japan, but also concerned about the potential drag on Japanese companies’ business in China.
Kyodo News and other local media outlets stated that, if the Japanese government does not retract its statements and prevent the situation from escalating further, it could cause even more severe damage to the real economy.
Kiuchi said that, the Japanese economy has already faced downward pressure due to U.S. tariffs, and now, with the deterioration of Japan-China relations, “there are even greater concerns for the Japanese economy.”
If the situation does not improve, the Japanese economy may continue to decline in the fourth quarter of this year, and experience another negative growth, he added.– NNN-NHK
