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The Japanese economic system has shown a contraction for the first time in six quarters, primarily caused by weakening overseas shipments because of recent American tariffs.

Group of Seven Economic Standings

Japan stands as the initial Group of Seven nation to report an GDP decline in the most recent three-month period.

As the United States still needing to release its gross domestic product figures for the third quarter, the present G7 economic rankings show:

• France: +0.5% quarterly growth
• UK: +0.1%
• Canada: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: negative 0.4 percent

Travel Stocks Decline during Political Dispute with Beijing

In addition to the GDP decline, Japan is experiencing an escalating political conflict with China regarding Taiwan.

Shares in Japan's travel and consumer businesses have declined sharply after China advised its citizens to avoid traveling to Japan.

This action by Beijing heightened a political dispute that was sparked by statements from Japan's recently appointed PM about the possibility of deploying forces in the case of a hypothetical Chinese attack on Taiwan.

The situation triggered a surge of sell-offs across Japan's leisure stocks.

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

"The China-Japan tension over Taiwan and Beijing's advisory discouraging travel to Japan brings short-term difficulties for consumer-facing sectors.

"Chinese visitors account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially at risk."

Economic Contraction Breakdown

Japan's gross domestic product dropped by 0.4% in the July-September quarter, as manufacturers' overseas shipments were hit by duties levied by the United States recently.

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

Previously, the American government had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two nations reached a trade deal.

Private demand also declined, by 0.3 percent quarter-on-quarter.

On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent in the three months through September.

"Japan's economy was stable in the initial six months of this year and the latest GDP data showed that growth is paused temporarily.

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

The White House has lately acknowledged the effect of tariffs on Americans, reducing duties on food imports including meat, produce, coffee and bananas amid growing concerns about increasing costs.

Economic Agenda

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