🔗 Share this article Japan's Economy Shrinks as Overseas Sales Are Hit by US Trade Duties The Japanese economic system has experienced a drop for the initial time in six quarters, primarily driven by falling overseas shipments as a result of recent US trade duties. G7 Growth Standings Japan stands as the first Group of Seven economy to disclose an output shrinkage in the previous quarter. With the United States still needing to publish its gross domestic product figures for Q3 2025, the current G7 growth standings display: France: 0.5 percent expansion United Kingdom: 0.1 percent Canada: +0.1% (preliminary figure) Germany: zero growth Italy: no growth Japan: -0.4% Tourism Shares Slump during Political Rift with Beijing In addition to the GDP decline, Japan is dealing with an escalating political tension with China concerning Taiwan. Shares in Japan's tourism and retail businesses have dropped significantly after China urged its nationals to refrain from visiting to Japan. This decision by Beijing intensified a diplomatic feud that was triggered by remarks from Japan's new 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 Japan's tourism-related shares. Oriental Land stock fell by 5.7% Isetan Mitsukoshi tumbled by 11.3 percent The national carrier fell by 3.75 percent "The ongoing tension over Taiwan and Beijing's travel warning advising against travel to Japan creates near-term difficulties for consumer-facing sectors. "Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable." Economic Contraction Breakdown Japan's gross domestic product fell by 0.4% in the July-September quarter, as industrial exports were impacted by duties levied by the US recently. Overseas shipments were a key factor of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago. Previously, the US administration had threatened Japan with a additional 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries reached a trade deal. Private demand also declined, by 0.3% quarter-on-quarter. On an annual basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September. "The Japanese economic situation was strong in the initial six months of this year and today's GDP data showed that growth is paused for now. I anticipate Japan's economy to be back on a moderate recovery trend going forward." The White House has lately recognized the impact of tariffs on US consumers, reducing tariffs on imported food products including meat, produce, beverages and bananas amid growing concerns about increasing costs. Economic Calendar 8am GMT: Swiss GDP report for Q3 15:00 Greenwich Mean Time: US construction spending data for August