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The Japanese economic system has experienced a drop for the initial time in a year and a half, mainly driven by falling overseas shipments as a result of newly imposed American trade duties.

G7 Economic Rankings

Japan has become the initial Group of Seven country to disclose an economic contraction in the most recent quarter.

With the United States still needing to release its gross domestic product figures for the third quarter, the current G7 growth rankings display:

• France: +0.5% expansion
• UK: 0.1 percent
• Canada: +0.1% (provisional estimate)
• German economy: 0%
• Italy: no growth
• Japanese economy: negative 0.4 percent

Tourism Shares Slump during Political Dispute with China

In addition to the economic contraction, Japan is dealing with an escalating political tension with China concerning Taiwan.

Shares in Japanese tourism and consumer businesses have declined significantly after China recommended its citizens to refrain from visiting to Japan.

This action by Chinese authorities heightened a political dispute that was triggered by comments from Japan's recently appointed PM about the potential of sending troops in the case of a potential Chinese invasion on Taiwan.

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

• The Tokyo Disneyland operator stock fell by 5.7%
• The department store chain tumbled by 11.3%
• Japan Airlines declined by 3.75 percent

"The ongoing tension over Taiwan and China's advisory discouraging travel to Japan creates short-term headwinds for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making department stores, luxury retail, and hospitality especially vulnerable."

GDP Decline Details

Japan's GDP fell by 0.4% in the third quarter, as manufacturers' exports were affected by tariffs imposed by the US recently.

Overseas shipments were a major factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.

Previously, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15 percent when the two countries concluded a trade agreement.

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

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

"The Japanese economic situation was stable in the first half of this year and the latest GDP figures showed that growth is halted for now.

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

The White House has recently acknowledged the effect of tariffs on Americans, lowering duties on imported food products including meat, tomatoes, beverages and bananas amid increasing concerns about increasing costs.

Economic Agenda

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