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Japan's economy has shown a contraction for the initial time in a year and a half, primarily caused by falling exports as a result of recent US trade duties.

G7 Economic Leaderboard

The Japanese economy has become the first Group of Seven economy to disclose an output shrinkage in the previous three-month period.

With the United States yet to release its gross domestic product data for the third quarter, the present Group of Seven economic rankings show:

• The French economy: 0.5 percent expansion
• UK: 0.1 percent
• Canadian economy: 0.1 percent (preliminary figure)
• German economy: zero growth
• Italian economy: 0%
• Japan: negative 0.4 percent

Tourism Stocks Decline amid Diplomatic Dispute with Beijing

In addition to the economic contraction, Japan is facing an growing diplomatic tension with China concerning Taiwan.

Shares in Japan's tourism and consumer firms have declined noticeably after China recommended its residents to avoid visiting to Japan.

This action by Beijing heightened a political dispute that was triggered by statements from Tokyo's recently appointed prime minister about the potential of deploying troops in the case of a hypothetical Chinese attack on Taiwan.

The development triggered a surge of sell-offs across Japan's tourism-related shares.

• Oriental Land stock fell by 5.7%
• The department store chain tumbled by 11.3%
• The national carrier declined by 3.75 percent

"The ongoing dispute over Taiwan and China's advisory advising against travel to Japan introduces short-term headwinds for consumer-facing sectors.

"Tourists from China represent roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and tourism services especially at risk."

GDP Contraction Breakdown

Japanese GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were affected by duties imposed by the United States this year.

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

Earlier this year, the US administration had threatened Japan with a new 25% tariff on its products, which was later reduced to 15% when the two nations reached a trade deal.

Consumer spending also fell, by 0.3 percent compared to the previous quarter.

On an annualized basis, Japan's GDP contracted by 1.8 percent in the three months through September.

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

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

The White House has lately recognized the impact of tariffs on US consumers, lowering tariffs on imported food products including meat, tomatoes, beverages and bananas amid growing concerns about rising costs.

Economic Agenda

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