🔗 Share this article

The Japanese economic system has experienced a decline for the first time in a year and a half, largely driven by falling overseas shipments because of newly imposed American tariffs.

Group of Seven Economic Standings

Japan stands as the first Group of Seven country to disclose an GDP decline in the latest three-month period.

With the United States yet to release its gross domestic product figures for Q3 2025, the present Group of Seven economic leaderboard indicate:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italy: 0%
• Japanese economy: negative 0.4 percent

Tourism Stocks Decline during Political Rift with China

Alongside the economic contraction, Japan is experiencing an growing diplomatic dispute with China concerning Taiwan.

Stocks in Japan's travel and consumer companies have fallen significantly after China recommended its nationals to avoid visiting to Japan.

This decision by Chinese authorities heightened a diplomatic feud that was sparked by comments from Japan's new prime minister about the potential of sending forces in the case of a hypothetical Chinese attack on Taiwan.

The development triggered a surge of sell-offs across Japan's tourism-related stocks.

• Oriental Land shares dropped by 5.7%
• The department store chain tumbled by 11.3%
• Japan Airlines fell by 3.75%

"The ongoing dispute over Taiwan and China's advisory advising against visits to Japan brings near-term challenges for consumer-facing sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services particularly at risk."

Economic Decline Breakdown

Japan's gross domestic product dropped by 0.4% in the third quarter, as industrial exports were hit by tariffs imposed by the US this year.

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

Earlier this year, the US administration had proposed Japan with a new 25% tariff on its products, which was later lowered to 15 percent when the two countries concluded a trade agreement.

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

On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.

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

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

The US administration has lately recognized the impact of tariffs on Americans, reducing duties on imported food products including beef, tomatoes, beverages and fruits amid growing concerns about rising costs.

Economic Calendar

• 8am GMT: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August