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Japan's economy has recorded a contraction for the first time in six quarters, mainly driven by weakening exports because of newly imposed US tariffs.

Group of Seven Economic Rankings

Japan has become the first G7 economy to disclose an GDP decline in the previous three-month period.

As the US still needing to publish its GDP figures for the third quarter, the present Group of Seven economic rankings indicate:

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

Tourism Shares Slump amid Diplomatic Rift with Beijing

In addition to the economic contraction, Japan is experiencing an growing diplomatic dispute with China regarding Taiwan.

Shares in Japan's tourism and retail firms have fallen sharply after China advised its nationals to refrain from visiting to Japan.

This move by Chinese authorities escalated a diplomatic feud that was sparked by remarks from Tokyo's new prime minister about the possibility of deploying forces in the case of a potential Chinese attack on Taiwan.

The development caused a wave of selling across Japanese tourism-related stocks.

• The Tokyo Disneyland operator shares dropped by 5.7%
• Isetan Mitsukoshi plummeted by 11.3 percent
• The national carrier declined by 3.75%

"The ongoing dispute over Taiwan and China's advisory advising against visits to Japan creates short-term difficulties for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and hospitality especially vulnerable."

Economic Contraction Details

Japan's gross domestic product declined by 0.4% in the July-September quarter, as industrial overseas shipments were affected by tariffs levied by the United States this year.

Exports were a major factor of the decline, dropping 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 threatened Japan with a additional 25% tariff on its products, which was later lowered 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 shrank by 1.8 percent in the quarter through September.

"Japan's economy was strong in the initial six months of this year and today's GDP figures showed that growth is halted temporarily.

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

The US administration has lately acknowledged the effect of tariffs on Americans, reducing duties on food imports including beef, produce, beverages and bananas amid growing concerns about increasing costs.

Economic Agenda

• 8am GMT: Switzerland GDP report for Q3
• 3pm GMT: US construction spending data for August