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The Japanese economic system has shown a decline for the first time in six quarters, primarily caused by weakening overseas shipments as a result of newly imposed American tariffs.

Group of Seven Economic Rankings

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

With the US still needing to publish its GDP data for Q3 2025, the present Group of Seven economic standings display:

• The French economy: +0.5% expansion
• UK: +0.1%
• Canada: +0.1% (preliminary figure)
• German economy: 0%
• Italy: 0%
• Japan: negative 0.4 percent

Travel Stocks Decline during Political Rift with Beijing

Alongside the GDP decline, Japan is facing an escalating political dispute with China concerning Taiwan.

Shares in Japan's tourism and consumer businesses have fallen sharply after China urged its citizens to refrain from visiting to Japan.

This decision by Chinese authorities heightened a diplomatic feud that was triggered by remarks from Tokyo's new PM about the possibility of sending forces in the event of a potential Chinese attack on Taiwan.

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

• Oriental Land shares dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier declined by 3.75 percent

"The ongoing tension over Taiwan and Beijing's advisory discouraging travel to Japan introduces near-term difficulties for consumer-facing sectors.

"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially vulnerable."

GDP Contraction Details

Japanese GDP fell by 0.4 percent in the third quarter, as industrial exports were impacted by duties imposed by the US this year.

Exports were a primary factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Previously, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later reduced to 15% when the two nations concluded a trade agreement.

Consumer spending also fell, by 0.3 percent quarter-on-quarter.

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

"Japan's economy was solid in the first half of this year and the latest GDP data showed that momentum is paused for now.

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

The White House has lately recognized the effect of tariffs on US consumers, lowering tariffs on food imports including meat, produce, beverages and fruits amid growing concerns about increasing costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August