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Japan's economy has experienced a decline for the initial time in a year and a half, mainly caused by falling exports because of recent American trade duties.

Group of Seven Economic Rankings

Japan stands as the first Group of Seven nation to report an GDP decline in the latest three-month period.

As the United States yet to release its gross domestic product data for the third quarter, the present G7 growth rankings indicate:

• France: 0.5 percent quarterly growth
• United Kingdom: 0.1 percent
• Canadian economy: 0.1 percent (provisional estimate)
• Germany: zero growth
• Italy: 0%
• Japanese economy: negative 0.4 percent

Tourism Shares Decline amid Political Rift with China

Alongside the economic contraction, Japan is facing an growing diplomatic dispute with China regarding Taiwan.

Stocks in Japan's tourism and retail firms have declined sharply after China advised its nationals to refrain from visiting to Japan.

This move by Beijing heightened a political dispute that was triggered by comments from Tokyo's recently appointed prime minister about the potential of deploying troops in the event of a hypothetical Chinese invasion on Taiwan.

The development triggered a wave of sell-offs across Japanese tourism-related stocks.

• Oriental Land shares dropped by 5.7 percent
• Isetan Mitsukoshi plummeted by 11.3%
• The national carrier declined by 3.75 percent

"The ongoing tension over Taiwan and China's advisory discouraging travel to Japan brings near-term difficulties for retail and hospitality sectors.

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, high-end shopping, and tourism services particularly at risk."

Economic Contraction Breakdown

Japan's gross domestic product fell by 0.4 percent in the third quarter, as industrial overseas shipments were hit by tariffs imposed by the United States recently.

Exports were a major driver of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.

Previously, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two countries reached a trade deal.

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

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

"The Japanese economic situation was strong in the initial six months of this year and the latest GDP data showed that growth is halted temporarily.

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

The White House has recently acknowledged the effect of tariffs on Americans, lowering duties on imported food products including meat, tomatoes, beverages and bananas amid growing concerns about increasing costs.

Business Agenda

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