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The Japanese economic system has shown a contraction for the initial time in a year and a half, mainly driven by declining overseas shipments because of recent American trade duties.

Group of Seven Economic Leaderboard

Japan has become the first Group of Seven economy to announce an GDP decline in the latest three-month period.

As the United States yet to release its gross domestic product figures for Q3 2025, the current G7 economic standings indicate:

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

Travel Stocks Decline during Political Rift with China

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

Shares in Japanese tourism and retail businesses have dropped noticeably after China advised its nationals to avoid visiting to Japan.

This decision by Chinese authorities heightened a political dispute that was triggered by statements from Japan's recently appointed prime minister about the possibility of sending forces in the event of a potential Chinese invasion on Taiwan.

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

• Oriental Land stock dropped by 5.7%
• Isetan Mitsukoshi plummeted by 11.3 percent
• Japan Airlines fell by 3.75%

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

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

GDP Decline Details

Japanese gross domestic product fell by 0.4% in the third quarter, as industrial overseas shipments were affected by duties imposed by the United States recently.

Overseas shipments were a primary driver of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.

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

Private demand also declined, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was stable in the first half of this year and the latest GDP data showed that growth is paused temporarily.

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

The White House has lately acknowledged the effect of tariffs on US consumers, reducing tariffs on food imports including meat, tomatoes, coffee and fruits amid growing concerns about increasing costs.

Economic Calendar

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