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The Japanese economic system has recorded a decline for the first time in a year and a half, primarily driven by falling exports as a result of recent US trade duties.

Group of Seven Growth Standings

The Japanese economy stands as the initial Group of Seven economy to disclose an economic contraction in the latest three-month period.

With the United States still needing to release its GDP figures for Q3 2025, the current G7 growth leaderboard indicate:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canada: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japanese economy: -0.4%

Tourism Stocks Slump during Political Dispute with Beijing

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

Stocks in Japan's tourism and consumer businesses have fallen noticeably after China urged its nationals to refrain from visiting to Japan.

This decision by Beijing intensified a political dispute that was triggered by comments from Tokyo's new prime minister about the possibility of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.

The situation caused a surge of sell-offs across Japanese leisure shares.

• Oriental Land shares dropped by 5.7 percent
• The department store chain plummeted by 11.3%
• The national carrier declined by 3.75%

"The ongoing tension over Taiwan and China's advisory discouraging travel to Japan brings near-term challenges for consumer-facing sectors.

"Tourists from China represent roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality especially vulnerable."

Economic Contraction Details

Japanese GDP fell by 0.4 percent in the third quarter, as manufacturers' overseas shipments were affected by duties imposed by the United States recently.

Exports were a key factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Earlier this year, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two nations concluded a trade deal.

Consumer spending also declined, by 0.3 percent compared to the previous quarter.

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

"Japan's economy was stable in the initial six months of this year and the latest GDP figures showed that growth is paused for now.

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

The US administration has recently acknowledged the impact of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, coffee and bananas amid growing concerns about rising costs.

Business Calendar

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