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The Japanese economic system has recorded a decline for the initial time in six quarters, primarily caused by declining overseas shipments as a result of newly imposed American tariffs.

Group of Seven Growth Rankings

Japan has become the first G7 country to disclose an economic contraction in the most recent three-month period.

As the United States yet to release its gross domestic product figures for Q3 2025, the current G7 economic standings display:

• France: +0.5% quarterly growth
• United Kingdom: +0.1%
• Canadian economy: +0.1% (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japan: negative 0.4 percent

Travel Stocks Decline during Political Dispute with China

Alongside the GDP decline, Japan is experiencing an intensifying political conflict with China concerning Taiwan.

Shares in Japan's tourism and consumer firms have declined sharply after China recommended its citizens to avoid visiting to Japan.

This move by Chinese authorities heightened a political dispute that was initiated by statements from Japan's new PM about the possibility of deploying forces in the event of a potential Chinese attack on Taiwan.

The situation caused a surge of selling across Japanese tourism-related stocks.

• The Tokyo Disneyland operator shares dropped by 5.7 percent
• The department store chain plummeted by 11.3%
• The national carrier declined by 3.75%

"The China-Japan tension over Taiwan and Beijing's travel warning discouraging travel to Japan introduces near-term difficulties for consumer-facing sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially vulnerable."

Economic Decline Details

Japanese gross domestic product fell by 0.4% in the third quarter, as manufacturers' overseas shipments were affected by duties imposed by the US this year.

Overseas shipments were a major factor of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.

Previously, the American government had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries reached a trade deal.

Consumer spending also declined, by 0.3% compared to the previous quarter.

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

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

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

The US administration has lately recognized the impact of tariffs on Americans, lowering tariffs on imported food products including beef, produce, coffee and bananas amid growing concerns about rising costs.

Business Calendar

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