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Japan's economy has recorded a drop for the initial time in six quarters, largely driven by weakening exports due to recent American trade duties.

Group of Seven Growth Standings

Japan has become the initial Group of Seven economy to report an economic contraction in the latest quarter.

With the US still needing to release its gross domestic product figures for Q3 2025, the current Group of Seven growth rankings show:

• France: +0.5% expansion
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• German economy: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Shares Decline during Diplomatic Dispute with Beijing

In addition to the economic contraction, Japan is dealing with an intensifying political conflict with China concerning Taiwan.

Stocks in Japanese travel and consumer companies have dropped noticeably after China recommended its nationals to refrain from visiting to Japan.

This decision by Chinese authorities escalated a diplomatic feud that was triggered by statements from Tokyo's new PM about the possibility of sending forces in the event of a potential Chinese invasion on Taiwan.

The situation triggered a wave of sell-offs across Japanese tourism-related shares.

• Oriental Land stock dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3 percent
• The national carrier declined by 3.75%

"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan introduces short-term challenges for consumer-facing sectors.

"Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and tourism services particularly at risk."

Economic Contraction Breakdown

Japan's GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by tariffs levied by the United States recently.

Overseas shipments were a primary factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Previously, the American government had proposed Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade agreement.

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

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

"The Japanese economic situation was stable in the initial six months of this year and the latest GDP data showed that growth is halted for now.

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

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

Economic Agenda

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