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Japan's economy has shown a decline for the first time in six quarters, primarily driven by weakening exports because of recent US trade duties.

Group of Seven Growth Leaderboard

Japan has become the first Group of Seven nation to disclose an economic contraction in the previous quarter.

As the US yet to release its GDP figures for the third quarter, the present G7 economic rankings show:

• The French economy: +0.5% expansion
• United Kingdom: +0.1%
• Canada: 0.1 percent (preliminary figure)
• Germany: 0%
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Stocks Slump amid Political Dispute with Beijing

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

Stocks in Japanese tourism and consumer firms have declined sharply after China urged its nationals to refrain from traveling to Japan.

This action by Chinese authorities heightened a political dispute that was initiated by remarks from Japan's recently appointed PM about the possibility of deploying forces in the event of a potential Chinese invasion on Taiwan.

The situation caused a surge of sell-offs across Japanese tourism-related stocks.

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

"The ongoing tension over Taiwan and Beijing's advisory discouraging visits to Japan introduces short-term challenges for retail and hospitality sectors.

"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially vulnerable."

Economic Contraction Details

Japan's gross domestic product declined by 0.4 percent in the July-September quarter, as industrial exports were impacted by tariffs levied by the United States this year.

Exports were a primary factor of the contraction, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a year ago.

Previously, the American government had proposed Japan with a new 25 percent tariff on its products, which was later lowered to 15% when the two countries reached a trade agreement.

Consumer spending also declined, by 0.3% compared to the previous quarter.

On an annual basis, Japan's GDP 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 today's GDP figures showed that growth is paused for now.

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

The White House has lately recognized the impact of tariffs on Americans, reducing duties on food imports including beef, produce, coffee and bananas amid growing concerns about rising costs.

Economic Calendar

• 8am GMT: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August