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The Japanese economic system has experienced a contraction for the first time in a year and a half, mainly driven by declining exports because of newly imposed American tariffs.

Group of Seven Growth Standings

The Japanese economy has become the initial Group of Seven economy to announce an economic contraction in the latest three-month period.

With the US still needing to publish its GDP figures for Q3 2025, the current Group of Seven economic standings show:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japan: -0.4%

Tourism Shares Slump amid Political Dispute with China

Alongside the GDP decline, Japan is dealing with an growing political dispute with China regarding Taiwan.

Shares in Japan's tourism and retail companies have declined noticeably after China urged its citizens to refrain from traveling to Japan.

This action by Beijing escalated a diplomatic feud that was triggered by statements from Japan's new prime minister about the possibility of deploying troops in the event of a potential Chinese invasion on Taiwan.

The development caused a wave of selling across Japan's leisure shares.

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

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

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly at risk."

GDP Decline Details

Japan's gross domestic product fell by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by tariffs levied by the United States recently.

Overseas shipments were a primary factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.

Previously, the American government had threatened Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade agreement.

Consumer spending also fell, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was solid in the initial six months of this year and today's GDP data showed that momentum is paused temporarily.

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

The White House has lately acknowledged the impact of tariffs on Americans, lowering duties on food imports including beef, tomatoes, coffee and fruits amid increasing concerns about increasing costs.

Economic Calendar

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