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The Japanese economic system has recorded a contraction for the initial time in six quarters, largely caused by declining overseas shipments because of newly imposed American tariffs.

Group of Seven Growth Standings

Japan stands as the initial Group of Seven economy to announce an output shrinkage in the previous three-month period.

As the United States still needing to publish its gross domestic product data for the third quarter, the current G7 growth rankings display:

• France: +0.5% expansion
• United Kingdom: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• Germany: zero growth
• Italian economy: 0%
• Japan: negative 0.4 percent

Travel Stocks Decline during Political Dispute with China

In addition to the economic contraction, Japan is facing an growing political tension with China concerning Taiwan.

Stocks in Japan's travel and retail companies have fallen significantly after China advised its residents to refrain from traveling to Japan.

This decision by Beijing heightened a diplomatic feud that was sparked by remarks from Tokyo's new PM about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.

The development led to a wave of sell-offs across Japanese leisure shares.

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

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

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality particularly at risk."

Economic Contraction Breakdown

Japan's gross domestic product declined by 0.4% in the July-September quarter, as industrial exports were impacted by duties levied by the US recently.

Overseas shipments were a major driver of the decline, 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 new 25 percent tariff on its products, which was later reduced to 15 percent when the two countries concluded a trade deal.

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

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

"Japan's economy was solid in the first half of this year and the latest GDP figures showed that momentum is halted for now.

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

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

Business Calendar

• 8am GMT: Switzerland GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August