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The Japanese economic system has shown a contraction for the first time in a year and a half, primarily caused by declining exports because of recent American tariffs.

Group of Seven Economic Rankings

Japan has become the first Group of Seven economy to report an output shrinkage in the previous quarter.

With the US still needing to publish its GDP figures for the third quarter, the present G7 growth standings display:

• France: +0.5% quarterly growth
• UK: 0.1 percent
• Canadian economy: +0.1% (provisional estimate)
• German economy: 0%
• Italian economy: 0%
• Japan: -0.4%

Travel Stocks Decline during Political Rift with Beijing

Alongside the GDP decline, Japan is facing an escalating diplomatic dispute with China concerning Taiwan.

Stocks in Japanese tourism and consumer firms have declined significantly after China advised its citizens to avoid visiting to Japan.

This decision by Chinese authorities escalated a diplomatic feud that was initiated by remarks from Tokyo's recently appointed prime minister about the potential of deploying troops in the case of a hypothetical Chinese invasion on Taiwan.

The situation triggered a wave of selling across Japan's tourism-related stocks.

• The Tokyo Disneyland operator shares fell by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines declined by 3.75%

"The China-Japan dispute over Taiwan and Beijing's travel warning advising against travel to Japan introduces near-term difficulties for retail and hospitality sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."

Economic Decline Breakdown

Japan's gross domestic product fell by 0.4 percent in the July-September quarter, as manufacturers' exports were impacted by tariffs imposed by the United States this year.

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

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

Consumer spending also fell, by 0.3% quarter-on-quarter.

On an annual basis, Japan's GDP contracted by 1.8 percent in the quarter through September.

"The Japanese economic situation was solid in the first half of this year and today's GDP data showed that growth is paused temporarily.

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

The White House has lately acknowledged the impact of tariffs on Americans, reducing duties on food imports 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