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Japan's economy has recorded a decline for the initial time in six quarters, mainly driven by falling exports because of recent US tariffs.

G7 Growth Leaderboard

Japan has become the first Group of Seven country to announce an output shrinkage in the latest three-month period.

As the US yet to publish its GDP figures for Q3 2025, the current G7 growth rankings show:

• France: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japan: negative 0.4 percent

Travel Stocks Slump during Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is experiencing an growing diplomatic conflict with China regarding Taiwan.

Stocks in Japanese tourism and consumer firms have fallen sharply after China urged its citizens to refrain from visiting to Japan.

This move by Chinese authorities escalated a diplomatic feud that was triggered by statements from Tokyo's new prime minister about the possibility of sending forces in the event of a potential Chinese attack on Taiwan.

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

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

"The China-Japan tension over Taiwan and China's travel warning discouraging travel to Japan brings near-term difficulties for retail and hospitality sectors.

"Tourists from China represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."

Economic Contraction Breakdown

Japan's gross domestic product fell by 0.4% in the July-September quarter, as industrial overseas shipments were hit by tariffs imposed by the United States recently.

Overseas shipments were a key factor of the decline, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.

Earlier this year, the US administration had proposed Japan with a new 25 percent tariff on its products, which was later reduced to 15 percent when the two nations concluded a trade agreement.

Consumer spending also fell, by 0.3 percent compared to the previous quarter.

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

"The Japanese economic situation was stable in the initial six months of this year and today's GDP figures showed that momentum is paused for now.

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

The US administration has recently recognized the effect of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, beverages and fruits amid increasing concerns about rising costs.

Economic Calendar

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