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The Japanese economic system has recorded a contraction for the initial time in six quarters, largely caused by weakening exports because of newly imposed American trade duties.

G7 Economic Standings

The Japanese economy has become the initial Group of Seven country to announce an GDP decline in the most recent quarter.

With the United States still needing to publish its GDP data for Q3 2025, the present Group of Seven growth rankings indicate:

• The French economy: +0.5% quarterly growth
• UK: 0.1 percent
• Canada: +0.1% (provisional estimate)
• Germany: zero growth
• Italian economy: 0%
• Japanese economy: negative 0.4 percent

Tourism Shares Decline during Diplomatic Dispute with China

Alongside the economic contraction, Japan is experiencing an escalating political conflict with China concerning Taiwan.

Shares in Japan's tourism and retail companies have fallen sharply after China recommended its nationals to refrain from traveling to Japan.

This move by Chinese authorities escalated a diplomatic feud 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 situation triggered a surge of selling across Japan's leisure shares.

• The Tokyo Disneyland operator stock dropped by 5.7%
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines fell by 3.75 percent

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

"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services particularly at risk."

Economic Decline Breakdown

Japanese GDP declined by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties imposed by the United States recently.

Overseas shipments were a primary factor of the decline, falling by 1.2% 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 additional 25% tariff on its goods, which was later lowered to 15% when the two countries concluded a trade agreement.

Consumer spending also declined, by 0.3% compared to the previous quarter.

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

"The Japanese economic situation was solid in the initial six months of this year and the latest GDP data showed that momentum is paused temporarily.

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

The US administration has lately acknowledged the effect of tariffs on Americans, lowering duties on food imports including beef, produce, beverages and bananas amid increasing concerns about increasing costs.

Economic Calendar

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