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Japan's economy has experienced a drop for the first time in six quarters, mainly driven by declining overseas shipments due to recent US trade duties.

G7 Growth Rankings

Japan stands as the first G7 nation to disclose an GDP decline in the previous quarter.

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

• France: +0.5% expansion
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Travel Shares Slump during Diplomatic Dispute with China

Alongside the GDP decline, Japan is experiencing an growing diplomatic tension with China regarding Taiwan.

Stocks in Japanese tourism and consumer firms have declined significantly after China urged its citizens to avoid visiting to Japan.

This decision by Chinese authorities intensified a political dispute that was triggered by statements from Japan's new PM about the potential of sending troops in the event of a potential Chinese invasion on Taiwan.

The development caused a wave of selling across Japan's leisure shares.

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

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

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable."

GDP Contraction Details

Japan's gross domestic product declined by 0.4 percent in the July-September quarter, as industrial exports were affected by tariffs levied by the US this year.

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

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two nations concluded a trade deal.

Private demand also fell, by 0.3% compared to the previous quarter.

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

"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that growth is paused temporarily.

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

The White House has lately recognized the effect of tariffs on Americans, lowering duties on imported food products including beef, tomatoes, beverages and bananas amid growing concerns about increasing costs.

Economic Agenda

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