The Japanese Economy Declines as Exports Face Impact by American Tariffs
The Japanese economic system has shown a contraction for the initial time in a year and a half, mainly driven by declining exports as a result of newly imposed US trade duties.
Group of Seven Growth Rankings
The Japanese economy has become the first G7 economy to announce an economic contraction in the latest three-month period.
As the US still needing to release its GDP data for Q3 2025, the present G7 growth leaderboard display:
- The French economy: 0.5 percent quarterly growth
- UK: 0.1 percent
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: -0.4%
Travel Stocks Decline during Diplomatic Dispute with China
In addition to the economic contraction, Japan is dealing with an growing diplomatic tension with China regarding Taiwan.
Shares in Japan's travel and retail companies have declined significantly after China advised its nationals to avoid visiting to Japan.
This move by Beijing heightened a diplomatic feud that was triggered by statements from Japan's new PM about the potential of deploying troops in the case of a potential Chinese invasion on Taiwan.
The development led to a surge of sell-offs across Japanese tourism-related stocks.
- The Tokyo Disneyland operator shares fell by 5.7%
- The department store chain plummeted by 11.3 percent
- The national carrier declined by 3.75 percent
"The China-Japan tension over Taiwan and China's advisory advising against visits to Japan creates short-term difficulties for retail and hospitality sectors.
"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and hospitality especially at risk."
GDP Contraction Details
Japanese GDP dropped by 0.4 percent in the third quarter, as manufacturers' exports were impacted by duties imposed by the US recently.
Exports were a major factor of the contraction, falling 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 products, which was later reduced to 15% when the two nations reached 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.
"Japan's economy was strong in the first half of this year and the latest GDP data showed that momentum is paused temporarily.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The US administration has recently recognized the effect of tariffs on US consumers, reducing tariffs on food imports including beef, produce, coffee and bananas amid increasing concerns about increasing costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
