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Japan's economy has shown a drop for the first time in six quarters, largely driven by falling overseas shipments as a result of newly imposed American trade duties.

Group of Seven Economic Standings

Japan stands as the first G7 economy to report an GDP decline in the most recent quarter.

As the United States still needing to publish its GDP data for the third quarter, the current G7 growth leaderboard display:

• France: +0.5% quarterly growth
• UK: 0.1 percent
• Canadian economy: +0.1% (preliminary figure)
• German economy: zero growth
• Italy: 0%
• Japan: -0.4%

Travel Stocks Decline during Political Rift with Beijing

Alongside the GDP decline, Japan is experiencing an growing diplomatic dispute with China regarding Taiwan.

Stocks in Japanese tourism and consumer companies have dropped sharply after China advised its residents to avoid visiting to Japan.

This action by Chinese authorities escalated a political dispute that was triggered by remarks from Japan's new PM about the potential of sending troops in the case of a potential Chinese attack on Taiwan.

The situation caused a wave of selling across Japan's tourism-related stocks.

• Oriental Land shares dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3%
• Japan Airlines declined by 3.75 percent

"The ongoing dispute over Taiwan and Beijing's travel warning advising against visits to Japan brings short-term difficulties for consumer-facing sectors.

"Chinese visitors account for roughly 25 percent of Japan's international visitors, making department stores, luxury retail, and tourism services particularly at risk."

GDP Decline Breakdown

Japanese GDP declined by 0.4% in the third quarter, as manufacturers' overseas shipments were hit by tariffs imposed by the US this year.

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

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

Consumer spending also fell, by 0.3 percent quarter-on-quarter.

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

"The Japanese economic situation was solid in the first half of this year and the latest GDP figures showed that growth is halted for now.

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

The White House has lately acknowledged the impact of tariffs on US consumers, reducing duties on imported food products including beef, produce, coffee and bananas amid growing concerns about increasing costs.

Economic Calendar

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