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The Japanese economic system has recorded a decline for the initial time in six quarters, mainly driven by falling exports as a result of newly imposed American trade duties.

G7 Economic Leaderboard

Japan stands as the first G7 country to disclose an GDP decline in the previous three-month period.

With the United States yet to release its gross domestic product data for the third quarter, the present G7 growth rankings indicate:

• France: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• German economy: zero growth
• Italy: no growth
• Japan: -0.4%

Tourism Stocks Slump during Political Rift with Beijing

In addition to the economic contraction, Japan is dealing with an escalating political tension with China regarding Taiwan.

Stocks in Japanese travel and retail firms have declined noticeably after China advised its nationals to refrain from visiting to Japan.

This action by Beijing heightened a diplomatic feud that was triggered by statements from Japan's new prime minister about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.

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

• Oriental Land shares dropped by 5.7%
• The department store chain plummeted by 11.3%
• Japan Airlines declined by 3.75%

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

"Tourists from China account for roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality especially vulnerable."

GDP Contraction Breakdown

Japan's GDP declined by 0.4% in the third quarter, as industrial overseas shipments were hit by tariffs imposed by the United States recently.

Overseas shipments were a key factor of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.

Earlier this year, the American government had threatened Japan with a new 25 percent tariff on its products, which was later reduced to 15% when the two countries concluded a trade deal.

Private demand 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 percent in the three months through September.

"Japan's economy was stable in the initial six months of this year and today's GDP data showed that growth is halted for now.

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

The US administration has lately recognized the impact of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, coffee 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