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The Japanese economic system has shown a contraction for the initial time in six quarters, primarily driven by falling overseas shipments due to recent US tariffs.

Group of Seven Growth Rankings

The Japanese economy has become the initial G7 nation to disclose an GDP decline in the previous three-month period.

As the United States yet to release its GDP data for Q3 2025, the present Group of Seven economic leaderboard indicate:

• France: 0.5 percent quarterly growth
• UK: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Tourism Stocks Decline amid Diplomatic Rift with China

Alongside the economic contraction, Japan is experiencing an growing political tension with China regarding Taiwan.

Stocks in Japan's tourism and retail firms have fallen sharply after China advised its citizens to refrain from traveling to Japan.

This move by Chinese authorities intensified a political dispute that was triggered by remarks from Tokyo's new prime minister about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.

The situation triggered a surge of selling across Japanese tourism-related shares.

• The Tokyo Disneyland operator shares dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• The national carrier fell by 3.75%

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

"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."

GDP Contraction Details

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

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

Earlier this year, the American government 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.

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

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

"The Japanese economic situation was solid in the first half of this year and the latest GDP figures showed that growth is halted temporarily.

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

The US administration has recently recognized the effect of tariffs on US consumers, reducing tariffs on food imports including beef, tomatoes, coffee and fruits amid growing concerns about increasing costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August