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Japan's economy has recorded a decline for the first time in a year and a half, mainly driven by declining overseas shipments due to newly imposed US trade duties.

Group of Seven Economic Rankings

Japan stands as the first Group of Seven nation to report an GDP decline in the most recent quarter.

With the US still needing to publish its GDP data for the third quarter, the present Group of Seven economic standings show:

• France: +0.5% expansion
• UK: +0.1%
• Canada: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japanese economy: -0.4%

Tourism Stocks Decline amid Diplomatic Dispute with China

In addition to the GDP decline, Japan is dealing with an escalating diplomatic conflict with China regarding Taiwan.

Shares in Japan's travel and consumer firms have dropped noticeably after China urged its nationals to refrain from visiting to Japan.

This decision by Chinese authorities escalated a diplomatic feud that was sparked by statements from Tokyo's new prime minister about the potential of sending forces in the case of a potential Chinese invasion on Taiwan.

The situation triggered a wave of sell-offs across Japan's leisure shares.

• Oriental Land stock dropped by 5.7 percent
• The department store chain plummeted by 11.3 percent
• Japan Airlines fell by 3.75%

"The ongoing dispute over Taiwan and Beijing's advisory discouraging visits to Japan introduces short-term headwinds for retail and hospitality sectors.

"Tourists from China account for roughly 25% of Japan's international visitors, making retail outlets, high-end shopping, and tourism services especially vulnerable."

GDP Contraction Details

Japanese GDP fell by 0.4 percent in the third quarter, as manufacturers' exports were hit by duties imposed by the United States recently.

Exports were a major factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Previously, the American government had threatened Japan with a additional 25 percent tariff on its products, which was later lowered to 15 percent when the two nations concluded a trade agreement.

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

On an annual basis, Japan's real gross domestic product contracted by 1.8 percent in the three months through September.

"Japan's economy was strong in the first half of this year and today's GDP data showed that growth is halted temporarily.

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

The US administration has lately recognized the impact of tariffs on Americans, reducing duties on imported food products including beef, tomatoes, coffee and bananas amid increasing concerns about rising costs.

Economic Calendar

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