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Japan's economy has shown a drop for the initial time in a year and a half, primarily driven by weakening overseas shipments because of recent American tariffs.

G7 Growth Leaderboard

The Japanese economy stands as the initial Group of Seven economy to announce an economic contraction in the most recent three-month period.

As the United States still needing to release its GDP figures for Q3 2025, the present Group of Seven growth rankings display:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: 0%
• Italian economy: no growth
• Japanese economy: -0.4%

Tourism Shares Decline during Diplomatic Dispute with Beijing

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

Shares in Japan's travel and consumer businesses have dropped sharply after China recommended its citizens to refrain from traveling to Japan.

This action by Beijing heightened a diplomatic feud that was sparked by comments from Japan's recently appointed prime minister about the potential of sending troops in the event of a potential Chinese attack on Taiwan.

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

• The Tokyo Disneyland operator shares fell by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3 percent
• The national carrier fell by 3.75%

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

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

Economic Contraction Details

Japan's GDP dropped by 0.4 percent in the third quarter, as industrial exports were affected by duties levied by the United States recently.

Exports were a key driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.

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

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

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

"Japan's economy was solid in the first half of this year and today's GDP data showed that momentum is halted temporarily.

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

The White House has lately acknowledged the effect of tariffs on Americans, lowering duties on imported food products including meat, tomatoes, coffee and bananas amid increasing concerns about increasing costs.

Economic Calendar

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