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Japan's economy has experienced a contraction for the first time in six quarters, primarily caused by weakening exports as a result of newly imposed US tariffs.

Group of Seven Economic Leaderboard

The Japanese economy stands as the initial G7 nation to report an output shrinkage in the previous three-month period.

With the US still needing to publish its GDP figures for Q3 2025, the present G7 growth standings indicate:

• France: +0.5% quarterly growth
• UK: 0.1 percent
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Tourism Stocks Decline during Political Dispute with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying diplomatic tension with China concerning Taiwan.

Shares in Japan's travel and retail companies have fallen noticeably after China advised its citizens to refrain from visiting to Japan.

This move by Beijing intensified a diplomatic feud that was sparked by statements from Tokyo's recently appointed prime minister about the potential of deploying forces in the case of a hypothetical Chinese attack on Taiwan.

The situation led to a wave of sell-offs across Japan's leisure stocks.

• The Tokyo Disneyland operator shares fell by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines declined by 3.75 percent

"The ongoing dispute over Taiwan and Beijing's travel warning discouraging visits to Japan brings near-term challenges for consumer-facing sectors.

"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially vulnerable."

Economic Contraction Breakdown

Japanese GDP fell by 0.4 percent in the July-September quarter, as industrial overseas shipments were impacted by duties levied by the United States recently.

Exports were a primary factor of the contraction, falling by 1.2% 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 new 25% tariff on its products, which was later lowered to 15% when the two nations reached a trade deal.

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

On an annual 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 growth is halted temporarily.

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

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

Economic Calendar

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