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

Group of Seven Growth Standings

The Japanese economy has become the initial G7 nation to announce an GDP decline in the most recent quarter.

With the United States still needing to publish its GDP data for the third quarter, the current Group of Seven economic rankings display:

• France: +0.5% expansion
• United Kingdom: +0.1%
• Canada: +0.1% (preliminary figure)
• Germany: zero growth
• Italy: no growth
• Japan: negative 0.4 percent

Tourism Stocks Slump amid Political Rift with Beijing

In addition to the GDP decline, Japan is dealing with an escalating political dispute with China regarding Taiwan.

Stocks in Japan's travel and retail firms have declined noticeably after China advised its citizens to refrain from traveling to Japan.

This move by Beijing escalated a diplomatic feud that was triggered by remarks from Tokyo's new PM about the potential of sending forces in the event of a hypothetical Chinese invasion on Taiwan.

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

• Oriental Land stock fell by 5.7%
• Isetan Mitsukoshi tumbled by 11.3%
• Japan Airlines declined by 3.75%

"The China-Japan dispute over Taiwan and China's travel warning discouraging travel to Japan creates near-term headwinds for consumer-facing sectors.

"Chinese visitors represent roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and tourism services especially at risk."

Economic Contraction Breakdown

Japan's gross domestic product declined by 0.4 percent in the third quarter, as manufacturers' overseas shipments were impacted by duties levied by the US recently.

Exports were a major factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a year ago.

Earlier this year, the American government had threatened Japan with a additional 25 percent tariff on its goods, which was later reduced to 15 percent when the two countries concluded a trade deal.

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

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

"The Japanese economic situation was stable in the initial six months of this year and today's GDP figures showed that growth is halted for now.

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

The White House has recently recognized the impact of tariffs on Americans, reducing duties on imported food products including meat, produce, coffee and fruits amid increasing concerns about increasing costs.

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