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The Japanese economic system has shown a drop for the initial time in six quarters, mainly driven by weakening exports as a result of newly imposed American trade duties.

Group of Seven Economic Rankings

Japan stands as the first Group of Seven country to announce an output shrinkage in the latest quarter.

As the US yet to publish its GDP figures for Q3 2025, the present G7 growth rankings show:

• France: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italian economy: 0%
• Japanese economy: negative 0.4 percent

Tourism Shares Slump during Political Dispute with Beijing

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

Shares in Japanese tourism and consumer firms have declined sharply after China urged its nationals to avoid visiting to Japan.

This move by Chinese authorities heightened a political dispute that was initiated by statements from Japan's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.

The situation triggered a wave of sell-offs across Japan's tourism-related stocks.

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

"The ongoing tension over Taiwan and China's advisory discouraging visits to Japan creates near-term difficulties for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly at risk."

GDP Contraction Details

Japanese GDP fell by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by duties levied by the US this year.

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 year ago.

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

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

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

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

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

The US administration has recently acknowledged the impact of tariffs on Americans, lowering duties on food imports including beef, tomatoes, coffee and bananas amid increasing concerns about rising costs.

Economic Calendar

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