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The Japanese economic system has shown a drop for the initial time in six quarters, primarily caused by declining exports because of recent American trade duties.

Group of Seven Growth Leaderboard

The Japanese economy has become the first Group of Seven economy to announce an GDP decline in the previous quarter.

With the US yet to release its gross domestic product data for the third quarter, the current G7 growth rankings display:

• France: 0.5 percent quarterly growth
• UK: 0.1 percent
• Canada: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italian economy: 0%
• Japanese economy: -0.4%

Tourism Shares Slump during Diplomatic Dispute with China

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

Stocks in Japanese travel and consumer businesses have dropped sharply after China urged its nationals to avoid visiting to Japan.

This action by Beijing intensified a political dispute that was sparked by remarks from Tokyo's new prime minister about the potential of deploying forces in the case of a hypothetical Chinese attack on Taiwan.

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

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

"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan brings near-term difficulties for consumer-facing sectors.

"Tourists from China account for roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services particularly vulnerable."

GDP Decline Breakdown

Japanese GDP declined by 0.4% in the third quarter, as industrial exports were affected by duties imposed by the United States recently.

Overseas shipments were a major factor of the decline, falling by 1.2 percent compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

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

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

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

"The Japanese economic situation was solid in the initial six months of this year and the latest GDP data showed that momentum is halted temporarily.

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

The White House has recently acknowledged the effect of tariffs on Americans, reducing duties on food imports including beef, produce, beverages and fruits amid increasing concerns about rising costs.

Business Agenda

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