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The Japanese economic system has shown a contraction for the initial time in six quarters, primarily caused by declining exports because of recent US trade duties.

Group of Seven Economic Standings

Japan has become the first G7 nation to report an economic contraction in the previous quarter.

With the United States yet to release its gross domestic product data for the third quarter, the present Group of Seven economic rankings show:

• The French economy: +0.5% expansion
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• German economy: 0%
• Italy: no growth
• Japanese economy: negative 0.4 percent

Travel Shares Decline amid Diplomatic Dispute with China

In addition to the GDP decline, Japan is experiencing an growing diplomatic dispute with China concerning Taiwan.

Shares in Japan's travel and retail firms have fallen significantly after China advised its residents to avoid traveling to Japan.

This move by Beijing heightened a diplomatic feud that was triggered by remarks from Japan's new PM about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.

The development triggered a surge of sell-offs across Japan's leisure stocks.

• Oriental Land stock fell by 5.7 percent
• Isetan Mitsukoshi tumbled by 11.3%
• The national carrier declined by 3.75%

"The China-Japan dispute over Taiwan and China's travel warning discouraging visits to Japan brings near-term headwinds 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 particularly vulnerable."

Economic Decline Breakdown

Japan's gross domestic product fell by 0.4 percent in the July-September quarter, as industrial exports were impacted by tariffs imposed by the United States recently.

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

Previously, the US administration had proposed Japan with a additional 25% tariff on its goods, which was later reduced to 15% when the two nations reached a trade agreement.

Private demand also fell, by 0.3% compared to the previous quarter.

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

"The Japanese economic situation was stable in the initial six months of this year and the latest GDP figures showed that momentum is paused temporarily.

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

The US administration has recently acknowledged the effect of tariffs on US consumers, lowering tariffs on food imports including beef, produce, beverages and fruits amid increasing concerns about increasing costs.

Business Calendar

• 8am GMT: Switzerland GDP report for Q3
• 3pm GMT: US construction spending data for August