🔗 Share this article

Japan's economy has experienced a drop for the first time in six quarters, largely caused by declining exports because of newly imposed American tariffs.

G7 Economic Standings

The Japanese economy has become the initial Group of Seven economy to report an economic contraction in the latest three-month period.

As the US yet to publish its gross domestic product data for Q3 2025, the present G7 growth leaderboard indicate:

• France: +0.5% expansion
• United Kingdom: +0.1%
• Canada: +0.1% (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japan: negative 0.4 percent

Tourism Stocks Decline during Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is facing an intensifying political dispute with China regarding Taiwan.

Stocks in Japan's travel and retail firms have dropped sharply after China urged its citizens to avoid traveling to Japan.

This action by Beijing intensified a political dispute that was sparked by comments from Japan's recently appointed PM about the possibility of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.

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

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

"The China-Japan tension over Taiwan and China's advisory discouraging visits to Japan creates near-term headwinds for consumer-facing sectors.

"Tourists from China represent roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality especially vulnerable."

GDP Contraction Breakdown

Japanese GDP dropped by 0.4 percent in the July-September quarter, as industrial exports were impacted by tariffs imposed by the US recently.

Overseas shipments were a major driver of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.

Previously, the US administration had threatened Japan with a new 25% tariff on its products, which was later lowered to 15% when the two countries concluded 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 today's GDP data showed that growth is halted for now.

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

The US administration has recently acknowledged the impact of tariffs on Americans, reducing tariffs on imported food products including beef, tomatoes, coffee 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