Japan's Economy Contracts as Exports Suffer by American Tariffs
The Japanese economic system has recorded a contraction for the initial time in a year and a half, largely caused by weakening exports due to recent American tariffs.
G7 Economic Leaderboard
Japan stands as the first Group of Seven country to announce an GDP decline in the latest three-month period.
As the United States yet to publish its GDP figures for Q3 2025, the current Group of Seven economic rankings indicate:
- The French economy: 0.5 percent quarterly growth
- United Kingdom: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: 0%
- Japan: negative 0.4 percent
Travel Stocks Decline during Political Dispute with Beijing
Alongside the GDP decline, Japan is facing an escalating diplomatic tension with China concerning Taiwan.
Stocks in Japan's travel and retail firms have fallen noticeably after China urged its citizens to avoid visiting to Japan.
This decision by Chinese authorities escalated a political dispute that was initiated by comments from Japan's recently appointed prime minister about the possibility of deploying troops in the event of a potential Chinese invasion on Taiwan.
The situation led to a wave of selling across Japan's tourism-related stocks.
- Oriental Land shares dropped by 5.7 percent
- Isetan Mitsukoshi plummeted by 11.3 percent
- Japan Airlines declined by 3.75 percent
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services particularly vulnerable."
Economic Decline Details
Japan's gross domestic product declined by 0.4 percent in the third quarter, as industrial overseas shipments were hit by duties imposed by the United States recently.
Overseas shipments were a primary driver of the contraction, dropping 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 American government had proposed Japan with a new 25% tariff on its products, which was later lowered to 15 percent when the two nations concluded a trade deal.
Private demand also declined, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the three months through September.
"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that growth is halted for now.
I expect Japan's economy to be returning on a gradual growth trend going forward."
The White House has lately recognized the impact of tariffs on Americans, lowering duties on food imports including meat, produce, coffee and bananas amid growing concerns about rising costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
