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Japan's economy has experienced a contraction for the first time in six quarters, primarily caused by weakening exports because of newly imposed US trade duties.

G7 Growth Standings

The Japanese economy has become the initial G7 country to disclose an economic contraction in the most recent three-month period.

As the US still needing to release its gross domestic product data for the third quarter, the current Group of Seven growth rankings display:

• The French economy: 0.5 percent expansion
• UK: 0.1 percent
• Canadian economy: 0.1 percent (provisional estimate)
• German economy: zero growth
• Italian economy: no growth
• Japanese economy: -0.4%

Tourism Stocks Slump during Diplomatic Rift with China

Alongside the GDP decline, Japan is facing an intensifying political tension with China concerning Taiwan.

Stocks in Japan's tourism and retail companies have dropped sharply after China advised its citizens to refrain from traveling to Japan.

This move by Chinese authorities heightened a political dispute that was initiated by statements from Japan's recently appointed prime minister about the possibility of sending forces in the case of a hypothetical Chinese attack on Taiwan.

The development led to a wave of sell-offs across Japan's leisure shares.

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

"The ongoing dispute over Taiwan and China's travel warning discouraging visits to Japan brings near-term headwinds for retail and hospitality sectors.

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

GDP Contraction Breakdown

Japanese GDP declined by 0.4% in the third quarter, as manufacturers' exports were impacted by tariffs imposed by the US recently.

Exports were a primary driver of the decline, falling by 1.2% compared with the previous quarter, and were 4.5% lower than a year ago.

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

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

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

"The Japanese economic situation was strong in the initial six months of this year and the latest GDP figures showed that growth is halted for now.

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

The US administration has lately recognized the effect of tariffs on Americans, reducing duties on imported food products including meat, tomatoes, beverages and fruits amid growing concerns about increasing costs.

Economic Calendar

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