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Japan's economy has recorded a drop for the first time in six quarters, mainly caused by weakening overseas shipments because of newly imposed US trade duties.

Group of Seven Economic Leaderboard

The Japanese economy stands as the initial Group of Seven country to disclose an economic contraction in the previous quarter.

As the United States yet to release its gross domestic product figures for the third quarter, the current G7 growth rankings display:

• The French economy: +0.5% quarterly growth
• United Kingdom: 0.1 percent
• Canada: 0.1 percent (preliminary figure)
• German economy: zero growth
• Italian economy: 0%
• Japan: -0.4%

Tourism Stocks Decline amid Political Rift with China

Alongside the GDP decline, Japan is dealing with an growing diplomatic dispute with China regarding Taiwan.

Shares in Japanese travel and consumer businesses have declined significantly after China recommended its citizens to avoid traveling to Japan.

This decision by Chinese authorities heightened a political dispute that was sparked by remarks from Tokyo's new prime minister about the possibility of sending troops in the event of a potential Chinese attack on Taiwan.

The situation led to a surge of selling across Japanese leisure stocks.

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

"The ongoing dispute over Taiwan and Beijing's advisory discouraging travel to Japan brings near-term challenges for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services especially vulnerable."

Economic Decline Breakdown

Japan's GDP declined by 0.4% in the third quarter, as industrial overseas shipments were hit by duties levied by the United States this year.

Exports were a primary driver of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a the same period last year.

Earlier this year, the American government had proposed Japan with a new 25% tariff on its products, which was later lowered to 15% when the two countries reached a trade deal.

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

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

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

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

The White House has lately recognized the effect of tariffs on Americans, reducing duties on food imports including meat, tomatoes, coffee and fruits amid increasing concerns about increasing costs.

Economic Calendar

• 08:00 Greenwich Mean Time: Swiss GDP report for Q3
• 3pm GMT: US construction spending data for August