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Japan's economy has recorded a decline for the first time in a year and a half, mainly caused by falling overseas shipments due to recent American tariffs.

Group of Seven Economic Standings

Japan stands as the initial Group of Seven nation to report an GDP decline in the previous quarter.

With the United States still needing to publish its gross domestic product data for the third quarter, the current G7 growth leaderboard show:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• Germany: 0%
• Italy: 0%
• Japanese economy: -0.4%

Travel Shares Decline amid Diplomatic Rift with China

In addition to the economic contraction, Japan is experiencing an intensifying diplomatic dispute with China concerning Taiwan.

Shares in Japan's travel and consumer businesses have fallen sharply after China urged its citizens to avoid traveling to Japan.

This action by Beijing heightened a diplomatic feud that was initiated by remarks from Tokyo's new prime minister about the possibility of sending troops in the case of a potential Chinese attack on Taiwan.

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

• The Tokyo Disneyland operator stock dropped by 5.7%
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines declined by 3.75%

"The China-Japan tension over Taiwan and China's advisory discouraging visits to Japan brings near-term headwinds for retail and hospitality sectors.

"Tourists from China represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially vulnerable."

GDP Decline Details

Japan's gross domestic product fell by 0.4% in the third quarter, as industrial overseas shipments were affected by tariffs levied by the United States this year.

Overseas shipments were a primary driver of the decline, dropping by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Previously, the US administration had threatened Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two nations reached a trade deal.

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

On an annual basis, Japan's GDP contracted by 1.8 percent in the three months through September.

"Japan's economy was solid in the initial six months of this year and the latest GDP figures showed that momentum is halted temporarily.

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

The White House has lately recognized the impact of tariffs on US consumers, reducing duties on imported food products including beef, tomatoes, coffee and fruits amid growing concerns about rising costs.

Economic Calendar

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