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The Japanese economic system has recorded a drop for the initial time in six quarters, primarily caused by falling exports due to newly imposed American trade duties.

G7 Economic Leaderboard

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

As the US yet to release its gross domestic product data for Q3 2025, the current G7 growth leaderboard show:

• The French economy: 0.5 percent quarterly growth
• UK: 0.1 percent
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japan: -0.4%

Tourism Stocks Decline amid Political Rift with China

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

Shares in Japanese tourism and retail firms have declined significantly after China urged its nationals to avoid traveling to Japan.

This decision by Beijing heightened a diplomatic feud that was initiated by statements from Tokyo's new PM about the potential of deploying forces in the event of a potential Chinese attack on Taiwan.

The development led to a surge of selling across Japanese tourism-related shares.

• Oriental Land stock fell by 5.7%
• Isetan Mitsukoshi tumbled by 11.3 percent
• The national carrier declined by 3.75 percent

"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan creates near-term challenges for retail and hospitality sectors.

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

GDP Decline Details

Japan's GDP fell by 0.4% in the third quarter, as industrial exports were affected by tariffs levied by the US this year.

Exports were a key driver of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

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

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

On an annualized basis, Japan's GDP shrank by 1.8% in the quarter through September.

"The Japanese economic situation was stable in the initial six months of this year and the latest GDP figures showed that growth is paused for now.

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

The US administration has lately recognized the effect of tariffs on Americans, reducing tariffs on food imports including beef, produce, coffee and bananas amid growing concerns about rising costs.

Economic Calendar

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