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Japan's economy has experienced a contraction for the initial time in six quarters, primarily caused by falling exports as a result of recent American trade duties.

G7 Growth Standings

The Japanese economy stands as the initial Group of Seven nation to announce an GDP decline in the most recent quarter.

As the United States still needing to release its GDP data for Q3 2025, the current G7 economic leaderboard display:

• France: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (provisional estimate)
• German economy: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Travel Stocks Slump during Diplomatic Rift with Beijing

In addition to the economic contraction, Japan is facing an growing political tension with China concerning Taiwan.

Stocks in Japan's tourism and retail companies have fallen significantly after China recommended its citizens to refrain from visiting to Japan.

This decision by Chinese authorities heightened a political dispute that was sparked by remarks from Tokyo's new PM about the possibility of deploying troops in the case of a potential Chinese attack on Taiwan.

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

• Oriental Land stock dropped by 5.7 percent
• The department store chain tumbled by 11.3%
• Japan Airlines fell by 3.75%

"The ongoing dispute over Taiwan and China's travel warning discouraging travel to Japan creates short-term difficulties for consumer-facing sectors.

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

Economic Contraction Breakdown

Japanese GDP declined by 0.4% in the July-September quarter, as industrial exports were hit by duties levied by the United States this year.

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

Previously, the US administration had threatened Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade agreement.

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

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

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

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

The US administration has recently acknowledged the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, beverages and bananas amid growing concerns about rising costs.

Business Calendar

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