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The Japanese economic system has recorded a drop for the initial time in six quarters, primarily driven by declining overseas shipments because of recent American trade duties.

G7 Growth Standings

Japan stands as the initial G7 economy to report an economic contraction in the most recent three-month period.

With the US still needing to publish its GDP data for the third quarter, the present Group of Seven economic standings indicate:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japan: negative 0.4 percent

Tourism Stocks Slump during Diplomatic Dispute with China

Alongside the economic contraction, Japan is facing an intensifying diplomatic tension with China concerning Taiwan.

Stocks in Japanese travel and retail companies have dropped significantly after China urged its residents to avoid visiting to Japan.

This move by Chinese authorities intensified a diplomatic feud that was triggered by remarks from Japan's new PM about the potential of sending troops in the event of a potential Chinese invasion on Taiwan.

The situation led to a wave of selling across Japanese tourism-related stocks.

• The Tokyo Disneyland operator stock fell by 5.7%
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier fell by 3.75%

"The ongoing dispute over Taiwan and Beijing's advisory advising against visits to Japan introduces near-term headwinds for retail and hospitality sectors.

"Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially at risk."

Economic Contraction Details

Japan's GDP declined by 0.4 percent in the third quarter, as industrial overseas shipments were impacted by tariffs levied by the US this year.

Overseas shipments were a primary driver 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 US administration had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two nations 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 contracted by 1.8% 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 temporarily.

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

The US administration has recently recognized the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, coffee and fruits amid growing concerns about rising costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August