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The Japanese economic system has experienced a decline for the first time in six quarters, primarily driven by falling overseas shipments because of recent American tariffs.

G7 Growth Leaderboard

The Japanese economy stands as the first Group of Seven country to announce an economic contraction in the previous three-month period.

As the US yet to release its GDP figures for Q3 2025, the present G7 economic leaderboard indicate:

• France: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japan: negative 0.4 percent

Tourism Stocks Slump during Political Dispute with China

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

Shares in Japanese tourism and consumer businesses have dropped sharply after China recommended its residents to refrain from visiting to Japan.

This decision by Beijing escalated a political dispute that was sparked by comments from Tokyo's new PM about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.

The development caused a wave of selling across Japan's leisure shares.

• The Tokyo Disneyland operator shares dropped by 5.7%
• Isetan Mitsukoshi plummeted by 11.3 percent
• Japan Airlines fell by 3.75%

"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan introduces short-term difficulties for retail and hospitality sectors.

"Tourists from China represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly vulnerable."

GDP Decline Breakdown

Japan's gross domestic product fell by 0.4% in the July-September quarter, as industrial overseas shipments were affected by tariffs imposed by the US this year.

Exports were a key driver of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15% when the two nations reached a trade deal.

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

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

"Japan's economy was solid in the first half of this year and today's GDP data showed that momentum is halted for now.

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

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

Business Agenda

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