Japan's Economy Declines while Exports Are Hit by American Tariffs
Japan's economy has experienced a drop for the first time in a year and a half, mainly caused by weakening overseas shipments because of recent US trade duties.
Group of Seven Growth Standings
Japan has become the initial G7 country to disclose an GDP decline in the most recent three-month period.
As the US yet to publish its gross domestic product figures for Q3 2025, the current G7 growth standings show:
- The French economy: 0.5 percent expansion
- UK: 0.1 percent
- Canada: +0.1% (provisional estimate)
- German economy: zero growth
- Italy: no growth
- Japan: -0.4%
Tourism Stocks Slump amid Political Rift with China
Alongside the economic contraction, Japan is dealing with an growing political conflict with China concerning Taiwan.
Stocks in Japan's tourism and consumer businesses have declined significantly after China recommended its citizens to refrain from visiting to Japan.
This move by Beijing heightened a diplomatic feud that was initiated by comments from Japan's recently appointed PM about the possibility of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.
The development triggered a surge of selling across Japanese tourism-related shares.
- Oriental Land stock fell by 5.7 percent
- Isetan Mitsukoshi tumbled by 11.3 percent
- The national carrier fell by 3.75 percent
"The ongoing tension over Taiwan and China's travel warning discouraging visits to Japan creates short-term challenges for consumer-facing sectors.
"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially at risk."
GDP Decline Details
Japan's gross domestic product declined by 0.4 percent in the July-September quarter, as industrial overseas shipments were hit by duties levied by the United States recently.
Overseas shipments were a key factor of the decline, dropping by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Previously, the American government 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 agreement.
Consumer spending also declined, by 0.3 percent compared to the previous quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the quarter through September.
"The Japanese economic situation was strong in the first half of this year and the latest GDP data showed that growth is halted for now.
I expect Japan's economy to be back on a moderate recovery trend going forward."
The White House has lately recognized the effect of tariffs on Americans, reducing duties on imported food products including beef, tomatoes, coffee and fruits amid increasing concerns about increasing costs.
Business Calendar
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August
