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Japan's economy has experienced a decline for the first time in six quarters, largely caused by declining overseas shipments due to recent US trade duties.

G7 Growth Leaderboard

Japan stands as the initial G7 nation to announce an GDP decline in the previous three-month period.

As the US yet to publish its gross domestic product data for the third quarter, the present Group of Seven economic rankings indicate:

• The French economy: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canada: +0.1% (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japanese economy: negative 0.4 percent

Tourism Shares Slump during Political Rift with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying political dispute with China concerning Taiwan.

Stocks in Japanese tourism and retail companies have dropped noticeably after China urged its residents to refrain from visiting to Japan.

This action by Beijing intensified a diplomatic feud that was sparked by comments from Tokyo's recently appointed PM about the potential of deploying troops in the case of a hypothetical Chinese invasion on Taiwan.

The development triggered a surge of sell-offs across Japanese tourism-related shares.

• Oriental Land shares dropped by 5.7%
• Isetan Mitsukoshi tumbled by 11.3 percent
• Japan Airlines declined by 3.75%

"The China-Japan tension over Taiwan and China's advisory advising against visits to Japan creates near-term difficulties for consumer-facing sectors.

"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."

Economic Decline Details

Japanese GDP declined by 0.4 percent in the July-September quarter, as industrial exports were hit by tariffs levied by the United States recently.

Overseas shipments were a major driver of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Previously, the US administration had proposed Japan with a new 25 percent tariff on its products, which was later lowered to 15 percent when the two countries reached a trade deal.

Consumer spending also declined, by 0.3% compared to the previous quarter.

On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.

"The Japanese economic situation was solid in the first half of this year and the latest GDP data showed that growth is paused temporarily.

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

The US administration has lately acknowledged the impact of tariffs on Americans, reducing tariffs on food imports including meat, produce, coffee and fruits amid growing concerns about increasing costs.

Economic Agenda

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