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Japan's economy has shown a drop for the initial time in a year and a half, mainly caused by falling overseas shipments because of recent US tariffs.

G7 Economic Standings

The Japanese economy has become the first Group of Seven economy to announce an economic contraction in the most recent three-month period.

With the United States yet to publish its GDP data for Q3 2025, the present G7 growth rankings indicate:

• France: 0.5 percent quarterly growth
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italian economy: no growth
• Japan: -0.4%

Travel Stocks Slump amid Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying political dispute with China regarding Taiwan.

Shares in Japan's travel and consumer companies have dropped sharply after China recommended its residents to refrain from visiting to Japan.

This action by Beijing intensified a diplomatic feud that was triggered by statements from Tokyo's new PM about the potential of sending forces in the case of a potential Chinese attack on Taiwan.

The situation led to a surge of sell-offs across Japan's tourism-related shares.

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

"The ongoing tension over Taiwan and Beijing's advisory discouraging visits to Japan brings near-term headwinds for retail and hospitality sectors.

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

GDP Decline Breakdown

Japan's GDP dropped by 0.4% in the third quarter, as industrial overseas shipments were impacted by tariffs imposed by the United States this year.

Exports were a major 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 percent tariff on its goods, which was later reduced to 15% when the two nations concluded a trade agreement.

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

On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.

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

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

The White House has recently recognized the impact of tariffs on US consumers, reducing tariffs on food imports including beef, tomatoes, coffee and bananas amid growing concerns about rising costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August