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Japan's economy has experienced a decline for the initial time in six quarters, mainly driven by declining overseas shipments due to recent American trade duties.

Group of Seven Growth Standings

The Japanese economy has become the initial G7 economy to announce an output shrinkage in the most recent three-month period.

With the United States still needing to release its gross domestic product data for the third quarter, the present Group of Seven economic leaderboard show:

• France: 0.5 percent quarterly growth
• United Kingdom: +0.1%
• Canadian economy: +0.1% (provisional estimate)
• German economy: zero growth
• Italy: no growth
• Japan: -0.4%

Tourism Shares Decline amid Diplomatic Dispute with Beijing

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

Shares in Japanese tourism and retail businesses have dropped sharply after China urged its citizens to avoid visiting to Japan.

This action by Beijing escalated a diplomatic feud that was sparked by statements from Japan's recently appointed PM about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.

The situation led to a wave of selling across Japanese tourism-related stocks.

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

"The ongoing tension over Taiwan and Beijing's advisory discouraging visits to Japan brings near-term headwinds for consumer-facing sectors.

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

Economic Decline Breakdown

Japan's GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by duties levied by the US recently.

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

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

Consumer spending also fell, by 0.3 percent compared to the previous quarter.

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

"The Japanese economic situation was strong in the first half of this year and today's GDP data showed that momentum is paused for now.

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

The White House has recently acknowledged the effect of tariffs on Americans, lowering tariffs on food imports including meat, produce, coffee and fruits amid growing concerns about increasing costs.

Business Calendar

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