🔗 Share this article The Japanese Economic Output Contracts while Exports Suffer by US Tariffs Japan's economy has experienced a contraction for the initial time in six quarters, largely caused by weakening exports due to recent US trade duties. Group of Seven Growth Rankings Japan stands as the first G7 country to disclose an output shrinkage in the most recent quarter. With the US yet to release its gross domestic product figures for Q3 2025, the current G7 economic standings display: France: 0.5 percent expansion United Kingdom: 0.1 percent Canadian economy: 0.1 percent (preliminary figure) Germany: 0% Italy: no growth Japan: -0.4% Tourism Stocks Slump amid Political Rift with Beijing Alongside the economic contraction, Japan is facing an growing diplomatic tension with China concerning Taiwan. Shares in Japanese tourism and consumer businesses have dropped sharply after China recommended its citizens to avoid traveling to Japan. This move by Chinese authorities escalated a diplomatic feud that was triggered by statements from Japan's recently appointed PM about the potential of sending troops in the case of a potential Chinese attack on Taiwan. The development caused a wave of selling across Japan's leisure stocks. Oriental Land stock fell by 5.7 percent The department store chain plummeted by 11.3% The national carrier fell by 3.75% "The ongoing dispute over Taiwan and China's advisory advising against travel to Japan introduces near-term headwinds for retail and hospitality sectors. "Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially at risk." Economic Contraction Breakdown Japan's GDP dropped by 0.4% in the July-September quarter, as manufacturers' overseas shipments were affected by tariffs levied by the United States this year. Overseas shipments were a major factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year. Earlier this year, the US administration had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries reached a trade agreement. Private demand also declined, by 0.3% quarter-on-quarter. On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September. "Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted for now. I expect Japan's economy to be back on a gradual recovery trend going forward." The US administration has recently recognized the impact of tariffs on Americans, lowering duties on food imports including beef, tomatoes, beverages and bananas amid increasing concerns about rising costs. Business Agenda 8am GMT: Swiss GDP report for Q3 15:00 Greenwich Mean Time: US construction spending data for August