🔗 Share this article

The Japanese economic system has shown a drop for the first time in six quarters, largely driven by weakening overseas shipments as a result of newly imposed American tariffs.

G7 Growth Rankings

The Japanese economy stands as the first Group of Seven country to disclose an economic contraction in the previous quarter.

As the US still needing to publish its GDP figures for Q3 2025, the present G7 growth standings show:

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

Tourism Shares Slump amid Political Rift with China

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

Stocks in Japan's tourism and consumer businesses have declined sharply after China recommended its citizens to avoid visiting to Japan.

This action by Chinese authorities heightened a diplomatic feud that was triggered by remarks from Japan's new PM about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.

The development led to a surge of selling across Japan's tourism-related stocks.

• The Tokyo Disneyland operator stock fell by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3 percent
• The national carrier declined by 3.75 percent

"The ongoing dispute over Taiwan and Beijing's travel warning advising against travel to Japan brings short-term headwinds for consumer-facing sectors.

"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly at risk."

GDP Contraction Details

Japanese GDP dropped by 0.4 percent in the third quarter, as industrial overseas shipments were affected by tariffs levied by the United States this year.

Exports were a primary driver of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.

Previously, the US administration had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade deal.

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

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

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

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

The US administration has lately acknowledged the effect of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, beverages and fruits amid increasing concerns about rising costs.

Business Calendar

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