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Japan's economy has shown a decline for the first time in six quarters, largely caused by declining exports as a result of newly imposed American tariffs.

Group of Seven Economic Standings

Japan stands as the initial Group of Seven economy to announce an GDP decline in the latest three-month period.

With the US still needing to publish its GDP data for the third quarter, the present Group of Seven economic leaderboard show:

• The French economy: +0.5% expansion
• United Kingdom: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: negative 0.4 percent

Tourism Shares Decline amid Diplomatic Rift with Beijing

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

Stocks in Japan's tourism and retail businesses have dropped sharply after China advised its citizens to avoid traveling to Japan.

This action by Beijing heightened a diplomatic feud that was sparked by comments from Tokyo's recently appointed prime minister 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 leisure shares.

• The Tokyo Disneyland operator shares fell by 5.7 percent
• The department store chain plummeted by 11.3%
• Japan Airlines fell by 3.75%

"The ongoing dispute over Taiwan and China's travel warning discouraging travel to Japan creates short-term challenges 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 especially vulnerable."

Economic Decline Breakdown

Japanese gross domestic product declined by 0.4 percent in the July-September quarter, as manufacturers' overseas shipments were impacted by tariffs imposed by the United States recently.

Overseas shipments were a major driver of the contraction, dropping by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15% when the two countries concluded a trade agreement.

Private demand 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% in the three months through September.

"Japan's economy was stable in the first half of this year and today's GDP figures showed that growth is paused for now.

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

The US administration has lately acknowledged the impact of tariffs on Americans, lowering duties on imported food products including meat, tomatoes, coffee and fruits amid growing concerns about increasing costs.

Business Calendar

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