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Japan's economy has experienced a drop for the initial time in a year and a half, largely driven by falling exports due to recent US trade duties.

G7 Economic Rankings

The Japanese economy has become the first G7 nation to announce an GDP decline in the most recent quarter.

With the United States yet to release its GDP figures for Q3 2025, the current Group of Seven economic standings display:

• The French economy: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Travel Shares Decline during Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is facing an escalating diplomatic dispute with China regarding Taiwan.

Stocks in Japanese travel and consumer businesses have dropped noticeably after China recommended its citizens to refrain from visiting to Japan.

This decision by Chinese authorities heightened a political dispute that was sparked by comments from Tokyo's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.

The development led to a surge of sell-offs across Japanese leisure stocks.

• The Tokyo Disneyland operator shares fell by 5.7%
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier declined by 3.75%

"The China-Japan tension over Taiwan and China's advisory discouraging visits to Japan introduces near-term challenges for retail and hospitality sectors.

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

Economic Decline Breakdown

Japan's GDP fell by 0.4 percent in the third quarter, as industrial overseas shipments were hit by tariffs levied by the US recently.

Exports were a major factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

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 nations concluded a trade agreement.

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

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

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

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

The White House has lately recognized the effect of tariffs on US consumers, reducing tariffs on imported food products including beef, tomatoes, beverages and bananas amid increasing concerns about rising costs.

Economic Agenda

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