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The Japanese economic system has shown a decline for the initial time in a year and a half, primarily caused by declining overseas shipments because of recent American tariffs.

G7 Growth Leaderboard

The Japanese economy has become the first G7 nation to disclose an GDP decline in the previous quarter.

With the US yet to publish its GDP figures for Q3 2025, the present Group of Seven growth rankings show:

• The French economy: 0.5 percent expansion
• UK: +0.1%
• Canada: +0.1% (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japan: -0.4%

Travel Stocks Decline during Diplomatic Dispute with China

In addition to the economic contraction, Japan is dealing with an escalating political dispute with China regarding Taiwan.

Shares in Japanese travel and consumer businesses have declined significantly after China urged its nationals to refrain from visiting to Japan.

This decision by Beijing intensified a diplomatic feud that was initiated by statements from Tokyo's recently appointed PM about the possibility of sending troops in the event of a potential Chinese invasion on Taiwan.

The situation led to a wave of sell-offs across Japanese tourism-related shares.

• Oriental Land stock fell by 5.7%
• The department store chain tumbled by 11.3%
• The national carrier fell by 3.75%

"The China-Japan dispute over Taiwan and China's travel warning discouraging travel to Japan brings short-term challenges for consumer-facing sectors.

"Chinese visitors account for roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially vulnerable."

GDP Decline Breakdown

Japan's GDP declined by 0.4% in the third quarter, as manufacturers' exports were hit by tariffs imposed by the US this year.

Overseas shipments were a major driver 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 threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15% when the two countries reached a trade agreement.

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

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

"Japan's economy was stable in the initial six months of this year and the latest GDP data showed that growth is halted temporarily.

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

The US administration has lately acknowledged the effect of tariffs on US consumers, lowering duties on imported food products including beef, tomatoes, beverages and fruits amid growing concerns about rising costs.

Economic Agenda

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