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Japan's economy has shown a contraction for the initial time in six quarters, primarily caused by weakening overseas shipments because of recent US trade duties.

Group of Seven Economic Leaderboard

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

As the United States still needing to publish its GDP figures for the third quarter, the current Group of Seven economic standings display:

• The French economy: +0.5% expansion
• UK: 0.1 percent
• Canada: +0.1% (preliminary figure)
• German economy: zero growth
• Italy: 0%
• Japanese economy: -0.4%

Travel Shares Slump amid Diplomatic Rift with China

Alongside the economic contraction, Japan is dealing with an intensifying political dispute with China regarding Taiwan.

Stocks in Japan's tourism and consumer companies have fallen sharply after China recommended its nationals to refrain from traveling to Japan.

This decision by Chinese authorities heightened a diplomatic feud that was triggered by statements from Tokyo's recently appointed PM about the possibility of sending forces in the case of a hypothetical Chinese invasion on Taiwan.

The situation caused a wave of sell-offs across Japanese tourism-related shares.

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

"The ongoing dispute over Taiwan and China's advisory discouraging visits to Japan introduces near-term difficulties for retail and hospitality sectors.

"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."

Economic Contraction Breakdown

Japanese gross domestic product fell by 0.4% in the July-September quarter, as industrial exports were hit by duties levied by the United States this year.

Exports were a primary factor of the decline, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.

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

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

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

"The Japanese economic situation was strong in the first half of this year and today's GDP figures showed that growth is halted temporarily.

I anticipate Japan's economy to be back on a gradual 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, coffee and fruits amid increasing concerns about rising costs.

Economic Calendar

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