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The Japanese economic system has experienced a decline for the initial time in a year and a half, primarily driven by declining overseas shipments as a result of newly imposed US tariffs.

Group of Seven Economic Leaderboard

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

As the US yet to release its gross domestic product figures for the third quarter, the current Group of Seven growth leaderboard display:

• France: +0.5% expansion
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• Germany: 0%
• Italy: no growth
• Japan: -0.4%

Travel Shares Slump amid Political Rift with Beijing

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

Stocks in Japanese tourism and retail businesses have declined noticeably after China urged its citizens to refrain from visiting to Japan.

This decision by Beijing heightened a political dispute that was sparked by comments from Tokyo's new PM about the potential of deploying troops in the event of a potential Chinese attack on Taiwan.

The development caused a wave of sell-offs across Japanese tourism-related stocks.

• The Tokyo Disneyland operator shares dropped by 5.7 percent
• The department store chain tumbled by 11.3%
• The national carrier fell by 3.75%

"The ongoing tension over Taiwan and China's travel warning discouraging travel to Japan introduces near-term headwinds for retail and hospitality sectors.

"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality especially vulnerable."

GDP Decline Details

Japanese gross domestic product dropped by 0.4% in the July-September quarter, as industrial exports were hit by duties levied by the US recently.

Exports were a primary driver of the contraction, falling by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.

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

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

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

"The Japanese economic situation was solid in the initial six months of this year and today's GDP data showed that growth is paused for now.

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

The White House has lately acknowledged the impact of tariffs on Americans, lowering tariffs on food imports including meat, tomatoes, beverages and bananas amid growing concerns about increasing costs.

Business Calendar

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