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Japan's economy has experienced a decline for the first time in a year and a half, mainly caused by declining overseas shipments because of recent American trade duties.

Group of Seven Growth Standings

Japan stands as the initial Group of Seven nation to disclose an output shrinkage in the latest three-month period.

As the United States yet to release its GDP data for Q3 2025, the present G7 growth rankings display:

• France: 0.5 percent expansion
• UK: +0.1%
• Canada: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Stocks Slump during Diplomatic Dispute with China

In addition to the GDP decline, Japan is facing an growing political conflict with China concerning Taiwan.

Stocks in Japanese travel and retail firms have fallen sharply after China advised its residents to avoid visiting to Japan.

This move by Chinese authorities heightened a political dispute that was sparked by remarks from Tokyo's recently appointed prime minister about the potential of deploying troops in the case of a hypothetical Chinese invasion on Taiwan.

The development caused a surge of sell-offs across Japan's tourism-related shares.

• Oriental Land stock fell by 5.7 percent
• The department store chain tumbled by 11.3 percent
• Japan Airlines declined by 3.75%

"The ongoing dispute over Taiwan and China's travel warning discouraging visits to Japan introduces near-term difficulties for retail and hospitality sectors.

"Chinese visitors account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and tourism services particularly at risk."

GDP Contraction Details

Japanese GDP fell by 0.4% in the July-September quarter, as industrial exports were affected by tariffs imposed by the United States recently.

Overseas shipments were a key factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Previously, the US administration had proposed Japan with a new 25 percent tariff on its products, which was later lowered to 15% when the two countries reached a trade deal.

Private demand also fell, by 0.3% quarter-on-quarter.

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

"The Japanese economic situation was stable 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 returning on a moderate recovery trend going forward."

The US administration has lately acknowledged the effect of tariffs on US consumers, lowering duties on food imports including meat, tomatoes, beverages and fruits amid increasing concerns about rising costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August