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The Japanese economic system has recorded a decline for the first time in six quarters, mainly driven by weakening overseas shipments because of newly imposed US tariffs.

Group of Seven Economic Standings

Japan has become the initial Group of Seven economy to report an economic contraction in the latest quarter.

As the United States yet to release its gross domestic product data for Q3 2025, the present Group of Seven economic leaderboard indicate:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: 0%
• Italy: no growth
• Japan: negative 0.4 percent

Travel Stocks Decline during Diplomatic Dispute with Beijing

Alongside the economic contraction, Japan is dealing with an escalating diplomatic conflict with China concerning Taiwan.

Shares in Japan's tourism and retail businesses have fallen noticeably after China recommended its residents to refrain from visiting to Japan.

This action by Chinese authorities escalated a diplomatic feud that was sparked by comments from Japan's new PM about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.

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

• Oriental Land stock dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3 percent
• The national carrier declined by 3.75 percent

"The China-Japan tension over Taiwan and Beijing's advisory discouraging visits to Japan creates short-term headwinds for consumer-facing sectors.

"Tourists from China account for roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality especially at risk."

Economic Decline Details

Japanese GDP dropped by 0.4% in the July-September quarter, as manufacturers' exports were affected by tariffs levied by the US this year.

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

Previously, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two countries reached a trade deal.

Private demand also declined, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was solid in the first half of this year and today's GDP figures showed that momentum is paused for now.

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

The White House has lately recognized the impact of tariffs on US consumers, lowering duties on food imports including beef, tomatoes, beverages and fruits amid growing concerns about increasing costs.

Business Calendar

• 8am GMT: Switzerland GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August