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Japan's economy has experienced a contraction for the initial time in six quarters, mainly driven by falling exports as a result of newly imposed US tariffs.

G7 Economic Standings

The Japanese economy stands as the first Group of Seven country to report an economic contraction in the most recent three-month period.

As the United States yet to publish its gross domestic product data for the third quarter, the present Group of Seven economic rankings show:

• The French economy: +0.5% expansion
• UK: 0.1 percent
• Canadian economy: +0.1% (provisional estimate)
• Germany: zero growth
• Italy: no growth
• Japanese economy: negative 0.4 percent

Travel Stocks Decline during Political Dispute with Beijing

Alongside the GDP decline, Japan is dealing with an growing political tension with China concerning Taiwan.

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

This decision by Chinese authorities heightened a political dispute that was triggered by remarks from Tokyo's new prime minister 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 Japan's leisure shares.

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

"The China-Japan dispute over Taiwan and Beijing's advisory advising against travel to Japan creates short-term headwinds for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality particularly vulnerable."

GDP Decline Details

Japan's gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' overseas shipments were hit by tariffs levied by the United States this year.

Exports were a key factor of the contraction, 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 threatened Japan with a additional 25 percent tariff on its goods, which was later reduced to 15 percent when the two countries reached a trade deal.

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

On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.

"The Japanese economic situation was solid in the initial six months of this year and the latest GDP figures showed that growth is halted for now.

I expect Japan's economy to be back on a moderate growth trend going forward."

The White House has recently recognized the impact of tariffs on US consumers, reducing tariffs on imported food products including beef, tomatoes, coffee and bananas amid growing concerns about rising costs.

Business Agenda

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