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The Japanese economic system has recorded a drop for the initial time in six quarters, mainly caused by weakening overseas shipments as a result of newly imposed US trade duties.

G7 Economic Standings

Japan has become the initial G7 nation to announce an economic contraction in the most recent quarter.

As the United States yet to release its gross domestic product figures for Q3 2025, the present G7 growth standings show:

• France: 0.5 percent expansion
• United Kingdom: +0.1%
• Canadian economy: +0.1% (provisional estimate)
• German economy: 0%
• Italian economy: no growth
• Japan: -0.4%

Travel Shares Decline amid Diplomatic Rift with Beijing

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

Stocks in Japan's tourism and consumer firms have dropped noticeably after China recommended its citizens to refrain from visiting to Japan.

This action by Beijing heightened a diplomatic feud that was sparked by statements from Tokyo's recently appointed PM about the possibility of deploying troops in the case of a hypothetical Chinese invasion on Taiwan.

The development caused a surge of selling across Japan's tourism-related shares.

• The Tokyo Disneyland operator shares dropped by 5.7%
• Isetan Mitsukoshi tumbled by 11.3 percent
• The national carrier declined by 3.75 percent

"The China-Japan tension over Taiwan and Beijing's travel warning advising against travel to Japan introduces near-term challenges for retail and hospitality sectors.

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

Economic Contraction Breakdown

Japan's gross domestic product fell by 0.4 percent in the third quarter, as manufacturers' exports were impacted by duties levied by the United States this year.

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

Earlier this year, the US administration had proposed Japan with a new 25% tariff on its products, which was later reduced to 15% when the two countries reached a trade deal.

Private demand also declined, by 0.3% 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 strong in the initial six months of this year and the latest GDP data showed that growth is paused for now.

I expect 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, reducing duties on food imports including meat, tomatoes, beverages and bananas amid growing concerns about rising costs.

Business Calendar

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