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The Japanese economic system has experienced a contraction for the initial time in a year and a half, primarily driven by falling exports due to newly imposed American tariffs.

Group of Seven Economic Leaderboard

Japan has become the first Group of Seven country to report an GDP decline in the previous three-month period.

With the US still needing to publish its GDP data for the third quarter, the present Group of Seven economic standings indicate:

• The French economy: +0.5% quarterly growth
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: 0%
• Italian economy: no growth
• Japanese economy: -0.4%

Tourism Stocks Decline amid Political Dispute with China

Alongside the economic contraction, Japan is experiencing an escalating diplomatic tension with China regarding Taiwan.

Shares in Japanese travel and consumer firms have declined significantly after China advised its nationals to refrain from traveling to Japan.

This move by Beijing intensified a diplomatic feud that was triggered by remarks from Japan's new PM about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.

The situation caused a wave of sell-offs across Japan's tourism-related stocks.

• The Tokyo Disneyland operator stock dropped by 5.7%
• Isetan Mitsukoshi tumbled by 11.3%
• The national carrier fell by 3.75%

"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan introduces near-term challenges for consumer-facing sectors.

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly vulnerable."

GDP Contraction Breakdown

Japanese gross domestic product dropped by 0.4% in the third quarter, as manufacturers' overseas shipments were hit by tariffs levied by the US recently.

Overseas shipments were a major driver of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.

Previously, the US administration had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two nations concluded a trade deal.

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

On an annualized basis, Japan's GDP contracted by 1.8% in the quarter 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 paused for now.

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

The US administration has recently acknowledged the effect of tariffs on US consumers, lowering duties on food imports including meat, produce, beverages and fruits amid increasing concerns about rising costs.

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