🔗 Share this article

Japan's economy has recorded a decline for the initial time in a year and a half, largely caused by weakening overseas shipments as a result of recent American trade duties.

G7 Economic Leaderboard

The Japanese economy stands as the initial Group of Seven nation to announce an economic contraction in the most recent quarter.

As the United States still needing to publish its GDP data for Q3 2025, the present Group of Seven growth leaderboard indicate:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: 0%
• Italian economy: no growth
• Japanese economy: negative 0.4 percent

Travel Stocks Slump during Political Rift with Beijing

Alongside the economic contraction, Japan is dealing with an escalating diplomatic tension with China concerning Taiwan.

Shares in Japanese tourism and consumer businesses have declined noticeably after China advised its nationals to refrain from visiting to Japan.

This decision by Chinese authorities escalated a political dispute that was initiated by statements from Tokyo's recently appointed prime minister about the potential of deploying forces in the event of a hypothetical Chinese invasion on Taiwan.

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

• The Tokyo Disneyland operator shares fell by 5.7%
• The department store chain tumbled by 11.3%
• Japan Airlines declined by 3.75 percent

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

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality especially vulnerable."

GDP Contraction Details

Japan's GDP dropped by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by duties imposed by the United States recently.

Overseas shipments were a major factor of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two nations reached a trade agreement.

Private demand also declined, by 0.3% compared to the previous quarter.

On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.

"Japan's economy was solid in the first half of this year and the latest GDP figures showed that momentum is halted for now.

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

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

Economic Calendar

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