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Japan's economy has shown a contraction for the initial time in a year and a half, primarily driven by declining overseas shipments due to newly imposed American tariffs.

G7 Economic Standings

The Japanese economy stands as the initial Group of Seven economy to disclose an output shrinkage in the previous three-month period.

With the United States still needing to publish its GDP figures for the third quarter, the present Group of Seven economic rankings indicate:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canada: +0.1% (provisional estimate)
• Germany: 0%
• Italy: 0%
• Japan: negative 0.4 percent

Travel Stocks Slump amid Political Dispute with China

In addition to the GDP decline, Japan is experiencing an growing diplomatic dispute with China concerning Taiwan.

Stocks in Japan's travel and consumer firms have fallen sharply after China recommended its residents to refrain from visiting to Japan.

This move by Beijing escalated a diplomatic feud that was sparked by comments from Tokyo's new prime minister about the possibility of sending troops in the case of a potential Chinese invasion on Taiwan.

The development caused a surge of sell-offs across Japanese tourism-related shares.

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

"The ongoing tension over Taiwan and Beijing's advisory discouraging visits to Japan introduces short-term difficulties for retail and hospitality sectors.

"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially vulnerable."

Economic Contraction Details

Japan's gross domestic product declined by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties levied by the US this year.

Overseas shipments were a major driver of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Earlier this year, the US administration had threatened Japan with a additional 25 percent tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade agreement.

Consumer spending also fell, 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 first half of this year and today's GDP data showed that momentum is halted for now.

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

The US administration has recently acknowledged the impact of tariffs on Americans, lowering duties on food imports including meat, produce, beverages and fruits amid growing concerns about rising costs.

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