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The Japanese economic system has recorded a drop for the initial time in a year and a half, mainly driven by declining overseas shipments because of recent American trade duties.

Group of Seven Economic Standings

Japan stands as the initial G7 nation to announce an output shrinkage in the previous three-month period.

As the United States yet to release its GDP figures for the third quarter, the present Group of Seven economic leaderboard display:

• The French economy: 0.5 percent expansion
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• Germany: 0%
• Italy: 0%
• Japanese economy: -0.4%

Travel Shares Slump amid Political Rift with China

Alongside the GDP decline, Japan is dealing with an growing political dispute with China concerning Taiwan.

Stocks in Japan's travel and consumer companies have dropped noticeably after China urged its residents to refrain from traveling to Japan.

This decision by Chinese authorities heightened a diplomatic feud that was initiated by statements from Tokyo's new PM about the possibility of sending forces in the event of a potential Chinese invasion on Taiwan.

The situation led to a surge of selling across Japan's tourism-related stocks.

• The Tokyo Disneyland operator shares fell by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3 percent
• Japan Airlines declined by 3.75%

"The ongoing tension over Taiwan and Beijing's advisory discouraging travel to Japan introduces near-term headwinds for consumer-facing sectors.

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

Economic Decline Breakdown

Japan's GDP dropped by 0.4 percent in the third quarter, as manufacturers' exports were affected by duties imposed by the United States recently.

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

Earlier this year, 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 fell, by 0.3% quarter-on-quarter.

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

"Japan's economy was strong in the initial six months of this year and today's GDP data showed that momentum is paused for now.

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

The White House has lately acknowledged the effect of tariffs on US consumers, lowering tariffs on imported food products including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.

Business Calendar

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