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

Group of Seven Economic Rankings

The Japanese economy has become the first Group of Seven economy to disclose an GDP decline in the most recent quarter.

As the US still needing to publish its GDP data for Q3 2025, the current G7 economic rankings indicate:

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

Travel Shares Slump amid Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying political conflict with China regarding Taiwan.

Stocks in Japan's tourism and consumer companies have declined noticeably after China recommended its residents to avoid traveling to Japan.

This decision by Beijing intensified a political dispute that was initiated by comments from Tokyo's new PM about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.

The development caused a wave of selling across Japanese leisure shares.

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

"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan introduces short-term challenges for consumer-facing sectors.

"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and tourism services particularly vulnerable."

Economic Contraction Details

Japan's GDP declined by 0.4 percent in the third quarter, as industrial overseas shipments were affected by duties imposed by the US recently.

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

Previously, the American government had threatened Japan with a new 25% 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 GDP contracted by 1.8% in the three months through September.

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

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

The White House has recently acknowledged the effect of tariffs on US consumers, reducing duties on imported food products including beef, tomatoes, coffee and bananas amid growing concerns about rising costs.

Economic Calendar

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