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The Japanese economic system has shown a decline for the first time in six quarters, primarily driven by weakening overseas shipments as a result of newly imposed US trade duties.

Group of Seven Economic Rankings

The Japanese economy stands as the initial G7 country to disclose an economic contraction in the previous three-month period.

With the US still needing to release its gross domestic product figures for the third quarter, the present Group of Seven economic standings show:

• The French economy: 0.5 percent expansion
• UK: +0.1%
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Tourism Shares Decline during Diplomatic Rift with Beijing

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

Shares in Japanese travel and retail companies have declined significantly after China advised its residents to refrain from visiting to Japan.

This action by Chinese authorities heightened a political dispute that was sparked by statements from Tokyo's new PM about the potential of deploying troops in the event of a potential Chinese invasion on Taiwan.

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

• Oriental Land stock fell by 5.7 percent
• The department store chain plummeted by 11.3%
• The national carrier declined by 3.75 percent

"The China-Japan dispute over Taiwan and China's travel warning discouraging travel to Japan brings short-term challenges for retail and hospitality sectors.

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

GDP Contraction Details

Japanese gross domestic product dropped by 0.4% in the third quarter, as manufacturers' exports were hit by duties imposed by the United States recently.

Overseas shipments were a major driver of the decline, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Earlier this year, the US administration had proposed Japan with a new 25% tariff on its products, which was later lowered to 15 percent when the two countries reached a trade deal.

Consumer spending also declined, by 0.3% compared to the previous quarter.

On an annual basis, Japan's GDP shrank by 1.8% in the three months through September.

"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.

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

The White House has lately recognized the effect of tariffs on Americans, reducing 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