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The Japanese economic system has experienced a decline for the initial time in a year and a half, largely caused by weakening exports because of recent American trade duties.

Group of Seven Economic Leaderboard

The Japanese economy has become the initial G7 nation to report an economic contraction in the latest three-month period.

With the US yet to release its GDP data for the third quarter, the present Group of Seven economic standings display:

• France: 0.5 percent expansion
• UK: +0.1%
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Travel Stocks Decline amid Political Rift with Beijing

In addition to the economic contraction, Japan is facing an escalating diplomatic conflict with China regarding Taiwan.

Shares in Japanese tourism and consumer firms have fallen significantly after China advised its citizens to refrain from traveling to Japan.

This move by Chinese authorities heightened a diplomatic feud that was initiated by remarks from Japan's new PM about the possibility of deploying forces in the event of a potential Chinese attack on Taiwan.

The development caused a wave of sell-offs across Japan's tourism-related shares.

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

"The China-Japan dispute over Taiwan and Beijing's advisory advising against travel to Japan creates short-term difficulties for retail and hospitality sectors.

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

GDP Decline Breakdown

Japan's gross domestic product dropped by 0.4% in the third quarter, as industrial exports were impacted by duties imposed by the United States recently.

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

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

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

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

"The Japanese economic situation was strong 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 US consumers, reducing duties on imported food products including beef, produce, coffee and bananas amid increasing concerns about rising costs.

Economic Calendar

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