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Japan's economy has recorded a decline for the first time in six quarters, primarily driven by weakening exports as a result of recent American trade duties.

Group of Seven Growth Standings

Japan has become the initial Group of Seven country to announce an GDP decline in the most recent quarter.

As the United States still needing to publish its gross domestic product data for the third quarter, the current G7 growth leaderboard show:

• The French economy: 0.5 percent expansion
• UK: +0.1%
• Canadian economy: +0.1% (preliminary figure)
• Germany: zero growth
• Italy: 0%
• Japan: negative 0.4 percent

Travel Stocks Decline during Political Rift with China

Alongside the GDP decline, Japan is dealing with an escalating political dispute with China regarding Taiwan.

Shares in Japan's tourism and retail companies have fallen significantly after China recommended its nationals to avoid traveling to Japan.

This action by Beijing heightened a diplomatic feud that was initiated by remarks from Tokyo's new prime minister about the possibility of deploying forces in the case of a potential Chinese attack on Taiwan.

The development led to a surge of sell-offs across Japan's tourism-related shares.

• The Tokyo Disneyland operator shares dropped by 5.7%
• The department store chain plummeted by 11.3%
• The national carrier declined by 3.75 percent

"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan introduces short-term challenges for retail and hospitality sectors.

"Tourists from China represent roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly vulnerable."

GDP Contraction Breakdown

Japan's gross domestic product declined by 0.4 percent in the third quarter, as industrial overseas shipments were affected by duties imposed by the US recently.

Exports were a key factor of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Earlier this year, the American government had proposed Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two countries concluded a trade agreement.

Consumer spending also fell, by 0.3 percent compared to the previous quarter.

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

"Japan's economy was stable in the first half of this year and today's GDP data showed that growth is paused for now.

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

The US administration has lately acknowledged the effect of tariffs on Americans, lowering duties on food imports including meat, tomatoes, coffee and bananas amid growing concerns about increasing costs.

Economic Calendar

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