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Japan's economy has recorded a decline for the initial time in six quarters, largely driven by weakening exports because of newly imposed American tariffs.

G7 Growth Rankings

Japan has become the first G7 country to report an GDP decline in the previous quarter.

With the US yet to release its GDP data for Q3 2025, the current G7 growth leaderboard display:

• The French economy: +0.5% quarterly growth
• United Kingdom: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: 0%
• Japan: negative 0.4 percent

Travel Stocks Slump during Political Rift with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying political tension with China regarding Taiwan.

Shares in Japan's tourism and retail companies have fallen sharply after China urged its nationals to avoid traveling to Japan.

This move by Beijing escalated a political dispute that was triggered by remarks from Tokyo's new PM about the possibility of sending troops in the case of a potential Chinese invasion on Taiwan.

The development triggered a wave of sell-offs across Japanese tourism-related shares.

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

"The ongoing dispute over Taiwan and China's advisory advising against travel to Japan creates short-term headwinds for retail and hospitality sectors.

"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and hospitality especially at risk."

Economic Decline Details

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

Exports were a major factor of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Earlier this year, the US administration 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 percent compared to the previous quarter.

On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.

"Japan's economy was stable in the first half of this year and today's GDP figures showed that growth is halted temporarily.

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

The US administration has lately recognized the effect of tariffs on US consumers, lowering duties on imported food products including meat, produce, beverages and fruits amid growing concerns about increasing costs.

Economic Calendar

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