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The Japanese economic system has shown a contraction for the first time in a year and a half, primarily caused by weakening exports as a result of recent American tariffs.

Group of Seven Growth Leaderboard

The Japanese economy stands as the initial Group of Seven country to announce an economic contraction in the previous quarter.

With the United States yet to publish its GDP data for Q3 2025, the present G7 growth leaderboard show:

• France: 0.5 percent quarterly growth
• UK: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: zero growth
• Italian economy: no growth
• Japanese economy: negative 0.4 percent

Travel Shares Decline amid Political Rift with Beijing

In addition to the GDP decline, Japan is experiencing an growing political conflict with China concerning Taiwan.

Stocks in Japanese travel and retail companies have declined sharply after China urged its citizens to avoid traveling to Japan.

This action by Chinese authorities escalated a political dispute that was sparked by comments from Japan's recently appointed prime minister about the possibility of sending forces in the event of a potential Chinese invasion on Taiwan.

The development triggered a surge of selling across Japan's tourism-related shares.

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

"The China-Japan dispute over Taiwan and China's travel warning advising against travel to Japan creates near-term difficulties for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services particularly vulnerable."

GDP Decline Details

Japanese GDP declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by duties levied by the United States recently.

Exports were a primary factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.

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 deal.

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

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

"Japan's economy was solid in the initial six months of this year and today's GDP data showed that growth is paused for now.

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

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

Business Agenda

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