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The Japanese economic system has experienced a drop for the first time in six quarters, largely caused by weakening exports as a result of newly imposed US trade duties.

G7 Economic Standings

Japan stands as the initial Group of Seven country to report an GDP decline in the previous three-month period.

With the US yet to publish its gross domestic product data for the third quarter, the current Group of Seven growth leaderboard display:

• France: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canada: +0.1% (provisional estimate)
• German economy: zero growth
• Italian economy: 0%
• Japanese economy: negative 0.4 percent

Tourism Stocks Slump during Political Dispute with China

Alongside the GDP decline, Japan is experiencing an escalating political tension with China regarding Taiwan.

Shares in Japanese tourism and retail businesses have fallen sharply after China urged its citizens to refrain from visiting to Japan.

This action by Chinese authorities intensified a diplomatic feud that was sparked by remarks from Tokyo's new PM about the potential of deploying forces in the case of a potential Chinese attack on Taiwan.

The development led to a surge of selling across Japan's tourism-related shares.

• Oriental Land shares fell by 5.7%
• The department store chain tumbled by 11.3 percent
• Japan Airlines fell by 3.75%

"The China-Japan tension over Taiwan and Beijing's travel warning discouraging travel to Japan creates near-term challenges for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."

Economic Decline Details

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

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

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

Consumer spending also declined, by 0.3 percent quarter-on-quarter.

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

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

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

The US administration has lately acknowledged the effect of tariffs on Americans, lowering tariffs on food imports including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.

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