🔗 Share this article

The Japanese economic system has shown a drop for the first time in a year and a half, primarily driven by declining exports because of recent American trade duties.

G7 Growth Rankings

Japan has become the first Group of Seven nation to announce an GDP decline in the most recent quarter.

With the United States still needing to publish its GDP data for Q3 2025, the current Group of Seven economic leaderboard show:

• The French economy: +0.5% expansion
• UK: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• Germany: 0%
• Italian economy: no growth
• Japanese economy: -0.4%

Tourism Stocks Slump amid Political Dispute with Beijing

Alongside the GDP decline, Japan is dealing with an escalating political conflict with China concerning Taiwan.

Stocks in Japan's tourism and consumer companies have fallen noticeably after China recommended its residents to avoid visiting to Japan.

This action by Beijing heightened a diplomatic feud that was sparked by remarks from Japan's new prime minister about the potential of deploying troops in the event of a potential Chinese attack on Taiwan.

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

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

"The China-Japan dispute over Taiwan and Beijing's advisory advising against travel to Japan creates near-term difficulties for consumer-facing sectors.

"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services especially at risk."

GDP Contraction Breakdown

Japan's gross domestic product declined by 0.4% in the third quarter, as industrial overseas shipments were impacted by tariffs imposed by the US this year.

Exports were a major driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Previously, the American government had proposed Japan with a new 25% tariff on its goods, which was later reduced to 15% when the two countries concluded a trade agreement.

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

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

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

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

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

Economic Agenda

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