🔗 Share this article

Japan's economy has shown a decline for the first time in a year and a half, largely caused by declining exports due to recent US trade duties.

Group of Seven Growth Rankings

Japan stands as the initial Group of Seven nation to announce an economic contraction in the previous three-month period.

With the United States still needing to release its gross domestic product data for Q3 2025, the present G7 economic standings show:

• The French economy: +0.5% quarterly growth
• United Kingdom: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Tourism Shares Decline during Political Dispute with Beijing

Alongside the economic contraction, Japan is experiencing an escalating political tension with China concerning Taiwan.

Shares in Japan's travel and consumer firms have declined significantly after China urged its nationals to avoid visiting to Japan.

This action by Beijing heightened a political dispute that was initiated by remarks from Tokyo's recently appointed PM about the potential of deploying forces in the case of a potential Chinese attack on Taiwan.

The situation caused a wave of sell-offs across Japan's leisure stocks.

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• The department store chain tumbled by 11.3%
• The national carrier fell by 3.75%

"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan brings 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 hospitality especially vulnerable."

Economic Contraction Details

Japanese gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs levied by the US recently.

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

Previously, the American government had proposed Japan with a new 25% tariff on its goods, which was later lowered to 15 percent when the two nations reached a trade agreement.

Private demand also fell, by 0.3 percent compared to the previous quarter.

On an annualized basis, Japan's GDP shrank by 1.8 percent in the quarter through September.

"Japan's economy was stable in the first half of this year and today's GDP data showed that momentum is halted for now.

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

The White House has recently recognized the effect of tariffs on Americans, reducing tariffs on imported food products including meat, tomatoes, coffee and fruits amid increasing concerns about increasing costs.

Economic Calendar

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