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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 falling exports due to recent American trade duties.

G7 Economic Leaderboard

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

With the United States still needing to release its GDP data for the third quarter, the current Group of Seven economic rankings display:

• The French economy: 0.5 percent quarterly growth
• UK: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• German economy: 0%
• Italian economy: no growth
• Japan: negative 0.4 percent

Tourism Stocks Slump amid Political Dispute with Beijing

Alongside the economic contraction, Japan is facing an growing diplomatic tension with China concerning Taiwan.

Stocks in Japanese tourism and consumer businesses have declined sharply after China urged its residents to avoid visiting to Japan.

This move by Chinese authorities intensified a political dispute that was triggered by statements from Japan's new PM about the possibility of deploying troops in the case of a hypothetical Chinese attack on Taiwan.

The development led to a surge of sell-offs across Japanese leisure stocks.

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

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

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and hospitality particularly at risk."

GDP Decline Details

Japan's GDP dropped by 0.4% in the July-September quarter, as manufacturers' exports were hit by duties imposed by the United States recently.

Exports were a key driver of the contraction, falling by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.

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 agreement.

Consumer spending also fell, by 0.3% quarter-on-quarter.

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

"Japan's economy was solid in the initial six months of this year and the latest GDP data showed that momentum is halted for now.

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

The White House has recently recognized the impact of tariffs on Americans, lowering tariffs on imported food products including meat, produce, beverages and bananas amid growing concerns about increasing costs.

Business Agenda

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