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Japan's economy has recorded a contraction for the first time in six quarters, largely driven by weakening exports as a result of recent American trade duties.

G7 Economic Leaderboard

The Japanese economy has become the initial G7 economy to disclose an GDP decline in the previous quarter.

With the US still needing to publish its GDP figures for Q3 2025, the current Group of Seven growth rankings show:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Travel Stocks Slump amid Diplomatic Rift with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying diplomatic dispute with China concerning Taiwan.

Shares in Japanese travel and consumer firms have fallen significantly after China recommended its citizens to refrain from visiting to Japan.

This action by Beijing intensified a diplomatic feud that was sparked by statements from Tokyo's recently appointed PM about the potential of sending forces in the case of a hypothetical Chinese attack on Taiwan.

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

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

"The ongoing tension over Taiwan and China's advisory advising against travel to Japan introduces near-term challenges for consumer-facing sectors.

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially vulnerable."

GDP Decline Details

Japanese gross domestic product declined by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs imposed by the United States this year.

Exports were a key driver of the decline, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.

Previously, the American government had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15 percent when the two nations concluded a trade agreement.

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

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

"The Japanese economic situation was strong in the first half of this year and the latest GDP data showed that growth is halted temporarily.

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

The US administration has lately acknowledged the effect of tariffs on US consumers, reducing duties on imported food products including beef, tomatoes, beverages and fruits amid growing concerns about increasing costs.

Business Calendar

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