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The Japanese economic system has experienced a decline for the initial time in a year and a half, mainly driven by declining exports as a result of newly imposed American trade duties.

G7 Growth Standings

Japan has become the initial G7 economy to announce an economic contraction in the latest quarter.

With the United States yet to publish its gross domestic product figures for the third quarter, the current Group of Seven economic standings show:

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

Tourism Stocks Slump during Political Dispute with Beijing

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

Shares in Japanese travel and retail companies have dropped noticeably after China advised its residents to avoid visiting to Japan.

This decision by Beijing heightened a diplomatic feud that was sparked by comments from Japan's new PM about the potential of deploying forces in the case of a hypothetical Chinese attack on Taiwan.

The development caused a wave of selling across Japan's leisure stocks.

• The Tokyo Disneyland operator shares dropped by 5.7%
• The department store chain tumbled by 11.3%
• The national carrier fell by 3.75%

"The China-Japan tension over Taiwan and China's travel warning discouraging visits to Japan brings short-term difficulties for consumer-facing sectors.

"Chinese visitors represent roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services particularly at risk."

GDP Decline Breakdown

Japanese gross domestic product fell by 0.4% in the July-September quarter, as manufacturers' exports were impacted by duties imposed by the United States recently.

Overseas shipments were a primary driver 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 US administration had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15% when the two nations reached a trade deal.

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

On an annualized basis, Japan's real gross domestic product shrank by 1.8 percent 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 recognized the impact of tariffs on Americans, lowering duties on food imports including meat, tomatoes, coffee and bananas amid increasing concerns about rising costs.

Business Agenda

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