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Japan's economy has experienced a drop for the first time in six quarters, mainly driven by weakening exports due to newly imposed US trade duties.

Group of Seven Economic Rankings

Japan stands as the first G7 country to disclose an GDP decline in the most recent three-month period.

As the US still needing to release its GDP figures for Q3 2025, the present G7 economic standings display:

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

Tourism Stocks Slump during Political Dispute with China

Alongside the GDP decline, Japan is dealing with an growing diplomatic tension with China concerning Taiwan.

Shares in Japan's tourism and consumer businesses have fallen significantly after China recommended its residents to refrain from visiting to Japan.

This decision by Beijing escalated a political dispute that was sparked by comments from Japan's new prime minister about the potential of sending troops in the case of a potential Chinese invasion on Taiwan.

The development caused a surge of sell-offs across Japan's leisure stocks.

• Oriental Land shares fell by 5.7%
• The department store chain plummeted by 11.3 percent
• The national carrier fell by 3.75%

"The ongoing dispute over Taiwan and Beijing's advisory advising against travel to Japan brings near-term difficulties for consumer-facing sectors.

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

GDP Contraction Details

Japan's gross domestic product fell by 0.4% in the third quarter, as industrial exports were hit by tariffs imposed by the United States this year.

Overseas shipments were a key factor of the decline, dropping 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 American government had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade agreement.

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

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

"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that momentum is halted temporarily.

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

The White House has lately recognized the impact of tariffs on US consumers, reducing duties on food imports including beef, tomatoes, coffee and bananas amid growing concerns about increasing costs.

Business Calendar

• 8am GMT: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August