🔗 Share this article

Japan's economy has recorded a drop for the initial time in a year and a half, mainly caused by weakening exports as a result of newly imposed US tariffs.

Group of Seven Economic Standings

The Japanese economy stands as the initial G7 nation to report an economic contraction in the most recent quarter.

As the US yet to publish its gross domestic product figures for Q3 2025, the current Group of Seven economic standings indicate:

• The French economy: +0.5% expansion
• UK: 0.1 percent
• Canada: +0.1% (provisional estimate)
• Germany: 0%
• Italian economy: no growth
• Japan: -0.4%

Tourism Shares Decline during Political Dispute with Beijing

Alongside the GDP decline, Japan is facing an growing political tension with China concerning Taiwan.

Stocks in Japanese travel and consumer businesses have fallen sharply after China urged its citizens to avoid traveling to Japan.

This move by Chinese authorities escalated a political dispute that was sparked by comments from Japan's recently appointed PM about the potential of sending troops in the event of a hypothetical Chinese attack on Taiwan.

The development caused a surge of selling across Japan's leisure shares.

• Oriental Land shares fell by 5.7 percent
• The department store chain plummeted by 11.3%
• The national carrier fell by 3.75%

"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term difficulties for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."

Economic Decline Breakdown

Japanese GDP declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were hit by tariffs levied by the US recently.

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

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

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

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

"Japan's economy was solid in the initial six months of this year and today's GDP data showed that growth is halted temporarily.

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

The White House has lately recognized the impact of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, beverages and bananas amid growing concerns about increasing costs.

Economic Agenda

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