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Japan's economy has recorded a decline for the initial time in six quarters, largely driven by weakening exports as a result of newly imposed US tariffs.

Group of Seven Growth Rankings

The Japanese economy stands as the first Group of Seven nation to disclose an GDP decline in the most recent quarter.

As the United States yet to release its GDP data for the third quarter, the present Group of Seven economic standings show:

• The French economy: +0.5% expansion
• United Kingdom: 0.1 percent
• Canada: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Shares Slump during Diplomatic Dispute with Beijing

In addition to the GDP decline, Japan is facing an escalating diplomatic dispute with China regarding Taiwan.

Shares in Japanese travel and consumer businesses have declined significantly after China urged its nationals to refrain from visiting to Japan.

This decision by Beijing heightened a diplomatic feud that was sparked by statements from Japan's recently appointed PM about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.

The situation caused a wave of selling across Japanese tourism-related stocks.

• The Tokyo Disneyland operator stock dropped by 5.7%
• Isetan Mitsukoshi plummeted by 11.3%
• Japan Airlines declined by 3.75 percent

"The ongoing tension over Taiwan and China's travel warning advising against visits to Japan creates near-term challenges for retail and hospitality sectors.

"Tourists from China represent roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and tourism services particularly at risk."

GDP Contraction Details

Japanese GDP fell by 0.4% in the third quarter, as manufacturers' overseas shipments were hit by tariffs levied by the US recently.

Overseas shipments were a major factor of the decline, 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 threatened Japan with a additional 25% tariff on its products, which was later lowered to 15% when the two countries reached a trade agreement.

Private demand also fell, by 0.3% compared to the previous quarter.

On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.

"The Japanese economic situation was solid in the first half of this year and the latest GDP figures showed that growth is paused temporarily.

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

The White House has lately recognized the impact of tariffs on US consumers, lowering duties on imported food products including meat, tomatoes, coffee and bananas amid increasing concerns about increasing costs.

Economic Agenda

• 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
• 3pm GMT: US construction spending data for August