Japan's Economy Contracts as Exports Suffer by US Trade Duties
The Japanese economic system has experienced a contraction for the initial time in six quarters, primarily driven by declining exports because of recent US tariffs.
Group of Seven Growth Standings
The Japanese economy has become the first Group of Seven country to report an GDP decline in the latest quarter.
With the United States still needing to publish its GDP data for Q3 2025, the current Group of Seven economic rankings display:
- France: +0.5% expansion
- UK: +0.1%
- Canada: +0.1% (preliminary figure)
- German economy: 0%
- Italy: 0%
- Japan: -0.4%
Tourism Shares Decline amid Diplomatic Dispute with Beijing
In addition to the economic contraction, Japan is dealing with an intensifying political dispute with China concerning Taiwan.
Stocks in Japan's travel and retail firms have dropped noticeably after China recommended its nationals to avoid visiting to Japan.
This decision by Beijing escalated a political dispute that was triggered by comments from Japan's recently appointed PM about the possibility of sending troops in the event of a hypothetical Chinese invasion on Taiwan.
The development caused a surge of sell-offs across Japanese tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- The department store chain tumbled by 11.3%
- Japan Airlines fell by 3.75%
"The China-Japan dispute over Taiwan and China's advisory discouraging visits to Japan introduces short-term difficulties for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality especially at risk."
GDP Decline Breakdown
Japanese GDP declined by 0.4% in the July-September quarter, as manufacturers' exports were affected by tariffs levied by the United States this year.
Exports were a key factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.
Previously, the US administration had proposed Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two countries concluded a trade deal.
Private demand also fell, by 0.3% compared to the previous quarter.
On an annual basis, Japan's GDP contracted by 1.8 percent 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 temporarily.
I anticipate Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on US consumers, reducing tariffs on imported food products including beef, produce, coffee and bananas amid growing concerns about rising costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
