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The Japanese economic system has experienced a decline for the initial time in a year and a half, largely caused by falling overseas shipments due to recent US trade duties.

Group of Seven Growth Rankings

Japan stands as the first Group of Seven nation to disclose an output shrinkage in the most recent quarter.

With the US yet to publish its GDP figures for Q3 2025, the current Group of Seven growth leaderboard display:

• The French economy: 0.5 percent expansion
• United Kingdom: +0.1%
• Canada: 0.1 percent (provisional estimate)
• Germany: 0%
• Italy: no growth
• Japan: negative 0.4 percent

Tourism Shares Decline during Diplomatic Dispute with Beijing

Alongside the economic contraction, Japan is dealing with an intensifying political tension with China concerning Taiwan.

Stocks in Japan's travel and consumer firms have dropped significantly after China advised its nationals to avoid traveling to Japan.

This action by Beijing heightened a diplomatic feud that was triggered by comments from Japan's new PM about the potential of sending troops in the case of a hypothetical Chinese attack on Taiwan.

The situation led to a wave of sell-offs across Japanese leisure shares.

• Oriental Land stock dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines declined by 3.75%

"The ongoing dispute over Taiwan and Beijing's advisory advising against travel to Japan creates short-term headwinds for retail and hospitality sectors.

"Chinese visitors account for roughly 25% of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly vulnerable."

Economic Decline Details

Japanese GDP fell by 0.4% in the July-September quarter, as industrial exports were hit by duties imposed by the US recently.

Overseas shipments were a major driver of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.

Earlier this year, the US administration had proposed Japan with a additional 25% tariff on its products, which was later reduced to 15% when the two countries reached a trade agreement.

Consumer spending also fell, by 0.3% quarter-on-quarter.

On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.

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

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

The White House has recently recognized the effect of tariffs on US consumers, lowering tariffs on imported food products including beef, produce, beverages and bananas amid growing concerns about rising costs.

Business Calendar

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