The Japanese Economy Contracts while Exports Suffer by American Tariffs
The Japanese economic system has shown a decline for the initial time in six quarters, primarily caused by declining exports as a result of newly imposed American trade duties.
G7 Economic Leaderboard
Japan has become the first Group of Seven country to report an GDP decline in the latest quarter.
As the United States still needing to release its gross domestic product data for Q3 2025, the present Group of Seven growth rankings show:
- France: 0.5 percent expansion
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japanese economy: negative 0.4 percent
Travel Stocks Slump amid Political Rift with China
Alongside the GDP decline, Japan is experiencing an growing diplomatic tension with China regarding Taiwan.
Stocks in Japan's tourism and retail businesses have declined significantly after China urged its residents to avoid visiting to Japan.
This action by Chinese authorities intensified a diplomatic feud that was sparked by statements from Japan's recently appointed prime minister about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.
The development triggered a surge of sell-offs across Japanese tourism-related shares.
- Oriental Land stock dropped by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The ongoing dispute over Taiwan and China's advisory discouraging travel to Japan introduces short-term headwinds for retail and hospitality sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality especially at risk."
Economic Decline Details
Japan's gross domestic product fell by 0.4% in the third quarter, as industrial overseas shipments were affected by tariffs levied by the US this year.
Overseas shipments were a key factor of the decline, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had threatened Japan with a new 25% tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade deal.
Private demand also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8 percent in the three months through September.
"Japan's economy was stable in the initial six months of this year and today's GDP data showed that growth is paused temporarily.
I anticipate Japan's economy to be returning on a gradual growth trend going forward."
The White House has lately acknowledged the impact of tariffs on US consumers, reducing duties on food imports including meat, produce, beverages and bananas amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
