Japan's Economic Output Shrinks while Overseas Sales Are Hit by American Tariffs
The Japanese economic system has recorded a contraction for the initial time in a year and a half, largely caused by declining exports as a result of recent US tariffs.
Group of Seven Growth Rankings
Japan has become the first Group of Seven country to disclose an economic contraction in the previous three-month period.
With the US still needing to release its gross domestic product data for Q3 2025, the present G7 economic leaderboard show:
- The French economy: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- Germany: 0%
- Italian economy: 0%
- Japan: -0.4%
Tourism Shares Slump amid Diplomatic Dispute with Beijing
In addition to the GDP decline, Japan is facing an growing diplomatic tension with China concerning Taiwan.
Shares in Japanese tourism and consumer businesses have declined significantly after China advised its nationals to avoid traveling to Japan.
This move by Chinese authorities heightened a political dispute that was sparked by comments from Tokyo's recently appointed PM about the potential of sending forces in the case of a hypothetical Chinese attack on Taiwan.
The situation triggered a surge of sell-offs across Japanese tourism-related stocks.
- The Tokyo Disneyland operator stock fell by 5.7 percent
- The department store chain tumbled by 11.3 percent
- Japan Airlines fell by 3.75 percent
"The ongoing dispute over Taiwan and China's travel warning discouraging travel to Japan creates short-term headwinds for consumer-facing sectors.
"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, luxury retail, and tourism services particularly at risk."
GDP Contraction Details
Japan's gross domestic product fell by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by duties imposed by the United States recently.
Overseas shipments were a primary factor of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had proposed Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries reached a trade deal.
Consumer spending also declined, by 0.3% quarter-on-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 strong in the first half of this year and the latest GDP figures showed that momentum is halted for now.
I expect Japan's economy to be back on a gradual recovery trend going forward."
The US administration has lately acknowledged the impact of tariffs on Americans, reducing tariffs on imported food products including beef, tomatoes, beverages and bananas amid increasing 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
