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The Japanese economic system has shown a drop for the initial time in a year and a half, mainly driven by declining exports as a result of newly imposed American trade duties.

Group of Seven Economic Standings

Japan has become the initial Group of Seven economy to announce an GDP decline in the previous quarter.

As the United States still needing to publish its GDP figures for Q3 2025, the present G7 economic leaderboard show:

• The French economy: 0.5 percent expansion
• United Kingdom: +0.1%
• Canadian economy: +0.1% (preliminary figure)
• German economy: zero growth
• Italian economy: no growth
• Japan: -0.4%

Travel Stocks Slump amid Political Rift with Beijing

In addition to the economic contraction, Japan is experiencing an growing political conflict with China regarding Taiwan.

Shares in Japanese travel and retail businesses have fallen noticeably after China recommended its nationals to avoid visiting to Japan.

This move by Beijing intensified a political dispute that was initiated by remarks from Tokyo's recently appointed PM about the possibility of sending troops in the event of a hypothetical Chinese invasion on Taiwan.

The situation triggered a wave of selling across Japan's leisure shares.

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

"The China-Japan tension over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term challenges for retail and hospitality sectors.

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and hospitality especially vulnerable."

GDP Contraction Breakdown

Japanese GDP dropped by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted by duties imposed by the US this year.

Exports were a major driver of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Earlier this year, the US administration had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15% when the two nations reached a trade agreement.

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

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

"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.

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

The US administration has lately recognized the effect of tariffs on Americans, reducing tariffs on food imports including meat, produce, coffee and bananas amid growing concerns about rising costs.

Economic Agenda

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