🔗 Share this article

The Japanese economic system has experienced a drop for the first time in six quarters, primarily driven by declining exports as a result of newly imposed US tariffs.

G7 Growth Rankings

The Japanese economy has become the first G7 nation to report an output shrinkage in the most recent quarter.

As the United States yet to publish its gross domestic product data for Q3 2025, the present Group of Seven growth standings show:

• France: +0.5% expansion
• UK: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: 0%
• Japan: negative 0.4 percent

Travel Shares Decline during Political Dispute with China

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

Shares in Japanese tourism and retail companies have declined noticeably after China urged its nationals to refrain from visiting to Japan.

This move by Beijing intensified a political dispute that was initiated by remarks from Japan's new PM about the potential of deploying troops in the case of a potential Chinese attack on Taiwan.

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

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

"The ongoing dispute over Taiwan and China's travel warning discouraging travel to Japan brings short-term headwinds for retail and hospitality sectors.

"Chinese visitors account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality particularly vulnerable."

GDP Decline Breakdown

Japanese gross domestic product fell by 0.4 percent in the third quarter, as industrial overseas shipments were impacted by duties levied by the US this year.

Overseas shipments were a primary factor of the decline, falling 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 goods, which was later reduced to 15% when the two nations concluded a trade agreement.

Private demand also declined, by 0.3% quarter-on-quarter.

On an annualized basis, Japan's GDP shrank by 1.8% 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 growth is halted temporarily.

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

The US administration has lately acknowledged the impact of tariffs on US consumers, lowering tariffs on food imports including meat, produce, coffee and fruits amid growing concerns about rising costs.

Economic Agenda

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