🔗 Share this article

Japan's economy has experienced a drop for the first time in a year and a half, mainly caused by declining exports due to recent US trade duties.

G7 Economic Leaderboard

Japan has become the initial Group of Seven nation to report an GDP decline in the most recent quarter.

With the United States yet to publish its GDP figures for Q3 2025, the present Group of Seven economic standings display:

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

Travel Shares Slump during Diplomatic Rift with Beijing

In addition to the economic contraction, Japan is experiencing an escalating political dispute with China regarding Taiwan.

Stocks in Japanese travel and retail businesses have fallen sharply after China advised its citizens to refrain from visiting to Japan.

This move by Beijing heightened a diplomatic feud that was sparked by remarks from Japan's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.

The development triggered a surge of sell-offs across Japan's leisure stocks.

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

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

"Tourists from China represent roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially vulnerable."

Economic Contraction Breakdown

Japan's GDP fell by 0.4 percent in the third quarter, as manufacturers' overseas shipments were impacted by tariffs levied by the US this year.

Exports were a major factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had proposed Japan with a new 25 percent tariff on its products, which was later lowered to 15 percent when the two nations reached a trade agreement.

Private demand also declined, by 0.3% quarter-on-quarter.

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

"The Japanese economic situation was stable in the initial six months of this year and the latest GDP figures showed that growth is halted temporarily.

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

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

Business Calendar

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