🔗 Share this article Japan's Economic Output Contracts as Overseas Sales Suffer by American Tariffs The Japanese economic system has shown a decline for the first time in a year and a half, primarily driven by weakening overseas shipments because of recent American tariffs. G7 Growth Rankings Japan has become the initial G7 economy to disclose an economic contraction in the latest three-month period. As the United States still needing to release its GDP figures for Q3 2025, the present G7 growth standings indicate: France: +0.5% expansion United Kingdom: 0.1 percent Canada: +0.1% (provisional estimate) Germany: 0% Italy: no growth Japan: -0.4% Travel Shares Slump during Diplomatic Rift with China Alongside the economic contraction, Japan is facing an escalating diplomatic tension with China regarding Taiwan. Stocks in Japanese tourism and retail firms have dropped noticeably after China recommended its citizens to refrain from traveling to Japan. This action by Beijing heightened a diplomatic feud that was initiated by comments from Japan's recently appointed PM about the potential of deploying forces in the case of a hypothetical Chinese attack on Taiwan. The situation led to a wave of selling across Japanese leisure shares. The Tokyo Disneyland operator stock dropped by 5.7 percent Isetan Mitsukoshi tumbled by 11.3% The national carrier fell by 3.75 percent "The China-Japan tension over Taiwan and China's travel warning advising against travel to Japan brings short-term difficulties for consumer-facing sectors. "Tourists from China represent roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services especially vulnerable." Economic Contraction Breakdown Japanese GDP declined by 0.4% in the July-September quarter, as manufacturers' exports were hit by duties levied by the US recently. Exports were a key factor of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago. Earlier this year, the American government had threatened Japan with a new 25% tariff on its products, which was later reduced to 15% when the two nations reached a trade agreement. Private demand also declined, by 0.3% quarter-on-quarter. On an annualized basis, Japan's GDP contracted by 1.8 percent in the quarter through September. "The Japanese economic situation was stable in the initial six months of this year and today's GDP figures showed that growth is paused for now. I expect Japan's economy to be back on a gradual recovery trend going forward." The White House has recently recognized the effect of tariffs on US consumers, reducing tariffs on imported food products including beef, produce, coffee and fruits amid increasing concerns about rising costs. Economic Agenda 8am GMT: Swiss GDP report for Q3 15:00 Greenwich Mean Time: US construction spending data for August