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Japan's economy has experienced a contraction for the initial time in six quarters, primarily driven by declining exports because of recent US tariffs.

Group of Seven Growth Leaderboard

Japan stands as the first Group of Seven nation to announce an GDP decline in the most recent three-month period.

With the US yet to publish its gross domestic product data for Q3 2025, the present Group of Seven growth leaderboard show:

• The French economy: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: 0%
• Japan: -0.4%

Tourism Shares Slump amid Diplomatic Dispute with Beijing

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

Stocks in Japan's tourism and consumer businesses have dropped sharply after China recommended its citizens to refrain from traveling to Japan.

This move by Chinese authorities intensified a political dispute that was sparked by remarks from Japan's recently appointed prime minister about the potential of deploying forces in the case of a potential Chinese invasion on Taiwan.

The situation triggered a wave of selling across Japanese tourism-related stocks.

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

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

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

GDP Decline Details

Japanese gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' exports were affected by tariffs imposed by the US this year.

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

Previously, the American government had proposed Japan with a new 25 percent tariff on its products, which was later lowered to 15% when the two countries concluded a trade deal.

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

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

"The Japanese economic situation was strong in the initial six months of this year and the latest GDP data showed that momentum is halted temporarily.

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

The White House has lately recognized the impact of tariffs on Americans, reducing duties on imported food products including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.

Business Calendar

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