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The Japanese economic system has experienced a contraction for the initial time in six quarters, mainly driven by weakening overseas shipments due to newly imposed US trade duties.

Group of Seven Economic Leaderboard

Japan has become the initial G7 economy to disclose an GDP decline in the previous quarter.

With the United States still needing to publish its GDP data for Q3 2025, the current G7 economic leaderboard display:

• The French economy: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: 0%
• Japan: negative 0.4 percent

Travel Stocks Decline amid Political Dispute with China

Alongside the economic contraction, Japan is experiencing an growing political tension with China concerning Taiwan.

Shares in Japanese travel and retail businesses have dropped noticeably after China urged its citizens to refrain from visiting to Japan.

This decision by Beijing escalated a diplomatic feud that was sparked by remarks from Tokyo's recently appointed PM about the possibility of deploying forces in the event of a potential Chinese invasion on Taiwan.

The situation caused a surge of selling across Japan's leisure stocks.

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines declined by 3.75 percent

"The ongoing tension over Taiwan and Beijing's travel warning discouraging travel to Japan creates short-term difficulties for consumer-facing sectors.

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

GDP Decline Breakdown

Japan's gross domestic product declined by 0.4 percent in the third quarter, as industrial overseas shipments were impacted by duties levied by the US this year.

Exports were a key factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15 percent when the two nations reached a trade deal.

Private demand also declined, by 0.3 percent compared to the previous 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 first half of this year and today's GDP data showed that growth is halted for now.

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 Americans, reducing tariffs on imported food products including beef, tomatoes, beverages and bananas amid growing concerns about rising costs.

Economic Calendar

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