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Japan's economy has recorded a decline for the initial time in six quarters, mainly driven by declining exports because of recent US tariffs.

Group of Seven Economic Leaderboard

The Japanese economy stands as the first Group of Seven nation to announce an output shrinkage in the latest three-month period.

As the US still needing to release its GDP figures for Q3 2025, the present Group of Seven economic standings show:

• The French economy: +0.5% quarterly growth
• UK: +0.1%
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italy: 0%
• Japanese economy: negative 0.4 percent

Travel Stocks Decline amid Political Rift with Beijing

In addition to the economic contraction, Japan is experiencing an growing political dispute with China concerning Taiwan.

Stocks in Japan's travel and retail companies have declined noticeably after China urged its residents to refrain from traveling to Japan.

This move by Chinese authorities heightened a diplomatic feud that was sparked by statements from Tokyo's recently appointed PM about the potential of sending troops in the event of a hypothetical Chinese attack on Taiwan.

The development led to a surge of sell-offs across Japan's tourism-related stocks.

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• The department store chain tumbled by 11.3 percent
• The national carrier fell by 3.75%

"The China-Japan tension over Taiwan and Beijing's advisory advising against visits to Japan introduces short-term difficulties for retail and hospitality sectors.

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

Economic Contraction Breakdown

Japan's gross domestic product fell by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by tariffs imposed by the US this year.

Exports were a major driver of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Earlier this year, the US administration had threatened Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade agreement.

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

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

"The Japanese economic situation was solid in the initial six months of this year and the latest GDP figures showed that growth is halted temporarily.

I expect Japan's economy to be returning on a gradual recovery trend going forward."

The US administration has recently acknowledged the effect of tariffs on Americans, lowering duties on imported food products including beef, produce, coffee and bananas amid increasing concerns about increasing costs.

Business Calendar

• 8am GMT: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August