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The Japanese economic system has shown a drop for the first time in a year and a half, mainly driven by declining exports as a result of newly imposed US trade duties.

G7 Growth Rankings

The Japanese economy stands as the first Group of Seven nation to disclose an GDP decline in the previous quarter.

As the United States still needing to publish its GDP data for Q3 2025, the current Group of Seven growth standings show:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canada: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: no growth
• Japan: negative 0.4 percent

Travel Stocks Decline during Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is dealing with an escalating political conflict with China concerning Taiwan.

Shares in Japan's tourism and retail businesses have fallen significantly after China recommended its citizens to refrain from traveling to Japan.

This move by Beijing intensified a political dispute that was sparked by comments from Tokyo's new prime minister about the possibility of sending forces in the event of a potential Chinese attack on Taiwan.

The situation triggered a surge of sell-offs across Japan's tourism-related stocks.

• Oriental Land shares 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 China's travel warning discouraging travel to Japan brings near-term challenges for retail and hospitality sectors.

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."

Economic Contraction Breakdown

Japan's gross domestic product fell by 0.4% in the July-September quarter, as manufacturers' overseas shipments were impacted by tariffs levied by the US this year.

Overseas shipments were a major factor 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.

Previously, the American government had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade deal.

Consumer spending 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 quarter through September.

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

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

The White House has recently recognized the effect of tariffs on Americans, reducing tariffs on imported food products including meat, produce, beverages and fruits amid increasing concerns about increasing costs.

Economic Calendar

• 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August