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The Japanese economic system has recorded a decline for the initial time in a year and a half, largely caused by weakening overseas shipments as a result of recent American trade duties.

G7 Economic Standings

Japan has become the first Group of Seven nation to disclose an GDP decline in the latest quarter.

As the United States yet to release its GDP data for the third quarter, the present Group of Seven economic standings show:

• France: 0.5 percent expansion
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italian economy: 0%
• Japan: negative 0.4 percent

Tourism Stocks Slump amid Diplomatic Dispute with Beijing

Alongside the GDP decline, Japan is experiencing an intensifying diplomatic tension with China concerning Taiwan.

Shares in Japanese travel and retail firms have declined sharply after China recommended its nationals to refrain from traveling to Japan.

This decision by Beijing escalated a diplomatic feud that was initiated by statements from Tokyo's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.

The development triggered a wave of sell-offs across Japanese tourism-related shares.

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

"The ongoing tension over Taiwan and China's travel warning advising against travel to Japan creates near-term headwinds for consumer-facing sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and hospitality especially vulnerable."

GDP Contraction Details

Japanese GDP dropped by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties imposed by the United States this year.

Exports were a major driver of the decline, falling by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

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

Private demand also fell, by 0.3 percent quarter-on-quarter.

On an annualized basis, Japan's GDP contracted by 1.8 percent in the quarter through September.

"The Japanese economic situation was strong in the first half of this year and today's GDP data showed that growth is halted for now.

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

The US administration has lately acknowledged the impact of tariffs on US consumers, reducing duties on food imports including beef, tomatoes, beverages and bananas amid growing concerns about rising costs.

Business Agenda

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