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The Japanese economic system has recorded a decline for the first time in a year and a half, largely caused by weakening exports because of newly imposed US trade duties.

Group of Seven Economic Rankings

The Japanese economy has become the first Group of Seven nation to announce an GDP decline in the latest quarter.

As the US yet to release its gross domestic product data for Q3 2025, the present G7 growth standings display:

• The French economy: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• Germany: 0%
• Italian economy: 0%
• Japan: -0.4%

Tourism Shares Slump amid Political Rift with Beijing

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

Stocks in Japan's travel and retail companies have fallen sharply after China urged its nationals to refrain from traveling to Japan.

This decision by Beijing escalated a diplomatic feud that was triggered by remarks from Tokyo's recently appointed prime minister about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.

The situation triggered a wave of selling across Japanese tourism-related stocks.

• The Tokyo Disneyland operator stock fell by 5.7%
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier fell by 3.75%

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

"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality especially vulnerable."

GDP Contraction Details

Japanese GDP dropped by 0.4% in the third quarter, as industrial exports were affected by duties levied by the US this year.

Overseas shipments were a major 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 goods, which was later lowered to 15 percent when the two nations concluded a trade deal.

Private demand also declined, by 0.3 percent compared to the previous quarter.

On an annualized basis, Japan's GDP contracted by 1.8% in the three months through September.

"Japan's economy was stable in the initial six months of this year and today's GDP figures showed that growth is halted temporarily.

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

The US administration has recently acknowledged the effect of tariffs on US consumers, lowering duties on food imports including beef, tomatoes, beverages and bananas amid increasing concerns about rising costs.

Business Agenda

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