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The Japanese economic system has shown a decline for the initial time in six quarters, primarily driven by declining exports due to newly imposed American tariffs.

Group of Seven Economic Standings

The Japanese economy has become the initial Group of Seven country to report an GDP decline in the previous quarter.

With the United States yet to release its gross domestic product data for Q3 2025, the present Group of Seven growth standings show:

• France: +0.5% expansion
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italian economy: no growth
• Japanese economy: negative 0.4 percent

Travel Shares Decline during Political Rift with China

In addition to the economic contraction, Japan is facing an intensifying diplomatic dispute with China concerning Taiwan.

Shares in Japan's travel and retail businesses have fallen significantly after China urged its citizens to refrain from visiting to Japan.

This move by Beijing escalated a diplomatic feud that was triggered by comments from Tokyo's recently appointed prime minister about the possibility of deploying forces in the case of a potential Chinese invasion on Taiwan.

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

• Oriental Land shares fell by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines fell by 3.75 percent

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

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially at risk."

Economic Decline Breakdown

Japanese GDP declined by 0.4% in the third quarter, as manufacturers' overseas shipments were hit by duties levied by the United States this year.

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

Earlier this year, the US administration had threatened Japan with a additional 25% tariff on its goods, which was later reduced to 15% when the two nations reached a trade agreement.

Private demand also fell, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was stable in the initial six months of this year and today's GDP figures showed that growth is halted for now.

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 US consumers, lowering duties on imported food products including beef, tomatoes, coffee and fruits amid increasing concerns about rising costs.

Economic Agenda

• 8am GMT: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August