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Japan's economy has shown a decline for the initial time in a year and a half, largely caused by declining exports because of recent US tariffs.

G7 Economic Standings

Japan stands as the initial G7 nation to announce an economic contraction in the most recent quarter.

As the United States yet to publish its GDP figures for Q3 2025, the present Group of Seven growth rankings show:

• France: +0.5% quarterly growth
• UK: +0.1%
• Canadian economy: +0.1% (preliminary figure)
• German economy: zero growth
• Italian economy: no growth
• Japan: negative 0.4 percent

Tourism Shares Slump amid Political Rift with China

Alongside the economic contraction, Japan is experiencing an intensifying political conflict with China concerning Taiwan.

Shares in Japan's travel and retail companies have fallen noticeably after China recommended its citizens to avoid traveling to Japan.

This action by Chinese authorities escalated a diplomatic feud that was sparked by statements from Japan's recently appointed prime minister about the possibility of deploying forces in the case of a potential Chinese attack on Taiwan.

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

• The Tokyo Disneyland operator shares fell by 5.7 percent
• The department store chain tumbled by 11.3%
• The national carrier declined by 3.75%

"The ongoing dispute over Taiwan and Beijing's travel warning advising against visits to Japan introduces near-term headwinds for retail and hospitality sectors.

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

Economic Decline Breakdown

Japanese GDP declined by 0.4% in the July-September quarter, as manufacturers' exports were affected by duties levied by the United States recently.

Overseas shipments were a primary factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Previously, the US administration had threatened Japan with a new 25% tariff on its goods, which was later lowered to 15% when the two nations concluded a trade deal.

Consumer spending also declined, by 0.3 percent compared to the previous quarter.

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

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

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

The White House has recently acknowledged the impact of tariffs on Americans, lowering duties on food imports including beef, produce, coffee and fruits amid increasing concerns about increasing costs.

Economic Calendar

• 8am GMT: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August