🔗 Share this article The Japanese Economy Shrinks while Exports Are Hit by US Tariffs Japan's economy has recorded a contraction for the first time in six quarters, primarily driven by falling exports because of recent US trade duties. G7 Economic Standings Japan has become the first G7 country to announce an economic contraction in the latest three-month period. As the United States still needing to publish its gross domestic product figures for the third quarter, the current Group of Seven growth leaderboard show: France: +0.5% quarterly growth United Kingdom: 0.1 percent Canadian economy: +0.1% (provisional estimate) German economy: zero growth Italy: no growth Japanese economy: -0.4% Tourism Shares Slump amid Political Dispute with Beijing In addition to the GDP decline, Japan is dealing with an growing political dispute with China concerning Taiwan. Stocks in Japanese tourism and consumer companies have fallen sharply after China advised its nationals to refrain from visiting to Japan. This decision by Chinese authorities escalated a political dispute that was sparked by statements from Japan's new PM about the potential of sending troops in the case of a hypothetical Chinese invasion on Taiwan. The development triggered a surge of sell-offs across Japanese tourism-related stocks. The Tokyo Disneyland operator stock fell by 5.7% The department store chain tumbled by 11.3% Japan Airlines fell by 3.75 percent "The ongoing dispute over Taiwan and Beijing's advisory advising against travel to Japan introduces near-term difficulties for consumer-facing sectors. "Chinese visitors represent roughly 25% of Japan's international visitors, making retail outlets, luxury retail, and hospitality especially vulnerable." Economic Contraction Details Japanese GDP fell by 0.4% in the third quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the US recently. Overseas shipments were a primary 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 American government had proposed Japan with a new 25% tariff on its products, which was later lowered to 15% when the two countries concluded a trade deal. Consumer spending also fell, by 0.3 percent compared to the previous quarter. On an annualized basis, Japan's real gross domestic product shrank by 1.8% in the three months through September. "Japan's economy was solid in the first half of this year and the latest GDP data showed that growth is paused temporarily. I expect Japan's economy to be returning on a moderate recovery trend going forward." The White House has recently recognized the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, produce, beverages and fruits amid increasing concerns about rising costs. Business Calendar 08:00 Greenwich Mean Time: Swiss GDP report for Q3 15:00 Greenwich Mean Time: US construction spending data for August