Japan's Economic Output Declines while Exports Suffer by American Trade Duties
The Japanese economic system has shown a drop for the initial time in a year and a half, largely caused by declining overseas shipments because of newly imposed US trade duties.
Group of Seven Growth Leaderboard
Japan has become the first Group of Seven economy to announce an economic contraction in the latest three-month period.
With the United States still needing to release its gross domestic product data for Q3 2025, the present Group of Seven economic leaderboard show:
- France: +0.5% quarterly growth
- UK: +0.1%
- Canadian economy: 0.1 percent (preliminary figure)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: -0.4%
Travel Shares Decline amid Diplomatic Dispute with China
Alongside the economic contraction, Japan is experiencing an growing political dispute with China regarding Taiwan.
Stocks in Japanese tourism and retail companies have dropped sharply after China urged its nationals to avoid visiting to Japan.
This move by Beijing escalated a diplomatic feud that was sparked by remarks from Japan's recently appointed prime minister about the possibility of sending troops in the case of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japan's leisure stocks.
- Oriental Land shares dropped by 5.7%
- Isetan Mitsukoshi plummeted by 11.3%
- The national carrier fell by 3.75%
"The China-Japan tension over Taiwan and China's advisory advising against travel to Japan introduces short-term challenges for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."
GDP Contraction Breakdown
Japanese GDP declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were hit by tariffs imposed by the US recently.
Overseas shipments were a primary factor of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had proposed Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade agreement.
Private demand also declined, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that momentum is halted for now.
I anticipate Japan's economy to be back on a gradual recovery trend going forward."
The US administration has recently acknowledged the effect of tariffs on US consumers, lowering tariffs on food imports including beef, produce, beverages and fruits amid growing concerns about increasing costs.
Business Calendar
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
