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The Japanese economic system has shown a drop for the first time in a year and a half, largely driven by weakening exports as a result of recent American trade duties.

G7 Growth Standings

Japan stands as the first Group of Seven economy to announce an GDP decline in the most recent quarter.

As the United States still needing to release its GDP data for Q3 2025, the present G7 growth rankings display:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Travel Stocks Decline amid Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is experiencing an escalating political tension with China regarding Taiwan.

Stocks in Japanese tourism and retail businesses have declined noticeably after China advised its citizens to refrain from traveling to Japan.

This move by Chinese authorities heightened a political dispute that was triggered by statements from Tokyo's recently appointed PM about the possibility of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.

The situation caused a wave of sell-offs across Japanese leisure stocks.

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

"The ongoing tension over Taiwan and China's advisory discouraging travel to Japan creates near-term headwinds for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and tourism services especially vulnerable."

Economic Contraction Details

Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as industrial exports were affected by duties levied by the US this year.

Exports were a major factor of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.

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

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

On an annual basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.

"The Japanese economic situation was solid in the initial six months of this year and today's GDP figures showed that momentum is halted for now.

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

The White House has lately acknowledged the impact of tariffs on Americans, lowering duties on imported food products including meat, produce, beverages and fruits amid increasing concerns about rising costs.

Business Calendar

• 8am GMT: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August