Japan's Economic Output Shrinks while Exports Suffer by American Tariffs
Japan's economy has shown a drop for the initial time in a year and a half, mainly caused by weakening overseas shipments because of recent American tariffs.
G7 Growth Leaderboard
The Japanese economy stands as the first Group of Seven nation to disclose an GDP decline in the most recent three-month period.
As the United States yet to publish its GDP figures for Q3 2025, the present G7 growth rankings display:
- France: 0.5 percent expansion
- UK: 0.1 percent
- Canada: 0.1 percent (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump during Political Dispute with Beijing
In addition to the GDP decline, Japan is dealing with an intensifying political tension with China regarding Taiwan.
Stocks in Japanese tourism and consumer companies have declined noticeably after China recommended its nationals to refrain from visiting to Japan.
This action by Chinese authorities escalated a political dispute that was triggered by comments from Tokyo's recently appointed prime minister about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.
The situation caused a surge of sell-offs across Japan's tourism-related shares.
- Oriental Land shares fell by 5.7 percent
- The department store chain tumbled by 11.3 percent
- The national carrier declined by 3.75%
"The China-Japan dispute over Taiwan and Beijing's travel warning discouraging visits to Japan creates short-term challenges for consumer-facing sectors.
"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, luxury retail, and hospitality particularly at risk."
GDP Contraction Breakdown
Japanese GDP fell by 0.4% in the third quarter, as industrial exports were affected by duties imposed by the United States this year.
Overseas shipments were a major driver of the decline, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a the same period last year.
Earlier this year, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later reduced to 15% when the two countries reached a trade agreement.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualized basis, Japan's GDP shrank by 1.8% in the three months through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP data showed that growth is halted for now.
I anticipate Japan's economy to be back on a moderate growth trend going forward."
The White House has lately acknowledged the effect of tariffs on Americans, reducing duties on imported food products including meat, tomatoes, beverages and bananas amid increasing concerns about increasing costs.
Business Agenda
- 8am GMT: Switzerland GDP report for Q3
- 15:00 Greenwich Mean Time: US construction spending data for August