Japan's Economy Declines as Overseas Sales Suffer by US Tariffs
The Japanese economic system has recorded a drop for the first time in a year and a half, mainly driven by weakening exports as a result of recent American tariffs.
Group of Seven Growth Rankings
Japan has become the initial Group of Seven country to report an GDP decline in the latest quarter.
With the US yet to publish its gross domestic product figures for Q3 2025, the present G7 growth rankings display:
- The French economy: 0.5 percent expansion
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: no growth
- Japanese economy: negative 0.4 percent
Travel Stocks Slump amid Political Rift with Beijing
Alongside the economic contraction, Japan is facing an growing political conflict with China regarding Taiwan.
Shares in Japanese travel and retail companies have dropped noticeably after China advised its nationals to avoid visiting to Japan.
This decision by Beijing intensified a political dispute that was sparked by remarks from Japan's recently appointed prime minister about the potential of sending troops in the case of a hypothetical Chinese attack on Taiwan.
The situation caused a surge of selling across Japanese tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- The department store chain plummeted by 11.3%
- The national carrier declined by 3.75%
"The ongoing dispute over Taiwan and Beijing's advisory advising against visits to Japan introduces near-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and tourism services particularly at risk."
Economic Contraction Breakdown
Japanese gross domestic product declined by 0.4% in the July-September quarter, as manufacturers' exports were affected by duties levied by the US this year.
Overseas shipments were a major driver of the contraction, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15% when the two nations reached a trade agreement.
Private demand also fell, by 0.3 percent compared to the previous quarter.
On an annualized basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.
"The Japanese economic situation was strong 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 gradual growth trend going forward."
The US administration has recently acknowledged the effect of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, beverages and fruits amid increasing concerns about increasing costs.
Business Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
