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The Japanese economic system has experienced a drop for the initial time in a year and a half, primarily caused by weakening overseas shipments because of recent American trade duties.

Group of Seven Economic Leaderboard

Japan stands as the initial G7 country to announce an output shrinkage in the most recent quarter.

With the US still needing to release its GDP data for the third quarter, the present G7 economic standings display:

• France: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canada: +0.1% (provisional estimate)
• German economy: zero growth
• Italian economy: no growth
• Japan: -0.4%

Tourism Shares Slump during Political Dispute with China

In addition to the GDP decline, Japan is dealing with an intensifying political tension with China regarding Taiwan.

Stocks in Japanese tourism and consumer businesses have fallen significantly after China advised its residents to refrain from traveling to Japan.

This move by Beijing heightened a political dispute that was triggered by statements from Tokyo's recently appointed prime minister about the possibility of deploying forces in the case of a hypothetical Chinese invasion on Taiwan.

The situation triggered a wave of selling across Japan's leisure stocks.

• The Tokyo Disneyland operator stock fell by 5.7 percent
• The department store chain tumbled by 11.3 percent
• The national carrier fell by 3.75%

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

"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly vulnerable."

Economic Contraction Details

Japanese gross domestic product fell by 0.4 percent in the July-September quarter, as industrial exports were affected by tariffs imposed by the US recently.

Exports were a primary factor of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two nations concluded a trade deal.

Private demand also declined, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was stable in the initial six months of this year and today's GDP data showed that momentum is paused for now.

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

The US administration has lately recognized the effect of tariffs on Americans, reducing tariffs on food imports including meat, tomatoes, beverages and bananas amid growing concerns about increasing costs.

Economic Calendar

• 8am GMT: Switzerland GDP report for Q3
• 3pm GMT: US construction spending data for August