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Japan's economy has recorded a decline for the first time in a year and a half, largely caused by declining overseas shipments because of newly imposed US tariffs.

Group of Seven Economic Rankings

The Japanese economy has become the first Group of Seven country to report an GDP decline in the most recent quarter.

As the United States yet to release its gross domestic product figures for Q3 2025, the present Group of Seven growth rankings indicate:

• The French economy: 0.5 percent expansion
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• Germany: 0%
• Italian economy: 0%
• Japan: negative 0.4 percent

Travel Shares Slump amid Political Dispute with China

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

Shares in Japanese tourism and retail businesses have dropped sharply after China advised its nationals to avoid traveling to Japan.

This decision by Beijing intensified a political dispute that was sparked by remarks from Tokyo's recently appointed prime minister about the possibility of deploying troops in the case of a potential Chinese attack on Taiwan.

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

• The Tokyo Disneyland operator shares dropped by 5.7 percent
• The department store chain tumbled by 11.3 percent
• Japan Airlines fell by 3.75%

"The ongoing tension over Taiwan and China's travel warning advising against visits to Japan creates short-term challenges for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially vulnerable."

GDP Decline Breakdown

Japan's GDP declined by 0.4 percent in the July-September quarter, as industrial overseas shipments were affected by duties imposed by the US this year.

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

Previously, the US administration had threatened Japan with a new 25 percent tariff on its products, which was later lowered to 15% when the two countries reached a trade agreement.

Private demand also fell, by 0.3% compared to the previous quarter.

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

"The Japanese economic situation was solid in the first half of this year and today's GDP figures showed that growth is paused temporarily.

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

The White House has recently acknowledged the effect of tariffs on Americans, lowering tariffs on food imports including meat, produce, beverages and fruits amid increasing concerns about rising costs.

Business Calendar

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August