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Japan's economy has shown a drop for the first time in six quarters, primarily caused by weakening exports as a result of newly imposed American tariffs.

G7 Growth Standings

Japan has become the first Group of Seven economy to announce an economic contraction in the most recent three-month period.

With the United States yet to publish its GDP data for the third quarter, the current G7 economic rankings show:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canada: +0.1% (provisional estimate)
• German economy: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Shares Slump during Political Rift with China

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

Shares in Japan's travel and consumer companies have dropped significantly after China advised its nationals to avoid visiting to Japan.

This decision by Chinese authorities heightened a political dispute that was sparked by statements from Japan's new prime minister about the potential of deploying forces in the case of a potential Chinese invasion on Taiwan.

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

• The Tokyo Disneyland operator stock dropped by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• The national carrier fell by 3.75 percent

"The China-Japan dispute over Taiwan and China's travel warning advising against visits to Japan brings short-term challenges for retail and hospitality sectors.

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

Economic Decline Details

Japanese gross domestic product fell by 0.4% in the July-September quarter, as industrial exports were affected by tariffs levied by the United States recently.

Overseas shipments were a primary driver of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.

Previously, the US administration had threatened Japan with a additional 25 percent tariff on its goods, which was later reduced to 15% when the two nations reached a trade deal.

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

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

"Japan's economy was solid in the first half of this year and the latest GDP data showed that momentum is paused for now.

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

The White House has lately recognized the effect of tariffs on US consumers, reducing duties on imported food products including beef, produce, coffee and bananas amid increasing concerns about increasing costs.

Business Agenda

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August