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Japan's economy has recorded a contraction for the first time in a year and a half, mainly driven by declining overseas shipments due to newly imposed US trade duties.

Group of Seven Growth Rankings

Japan stands as the initial G7 nation to disclose an GDP decline in the latest quarter.

As the US yet to publish its GDP figures for the third quarter, the current G7 growth standings show:

• The French economy: +0.5% quarterly growth
• United Kingdom: +0.1%
• Canada: 0.1 percent (preliminary figure)
• German economy: zero growth
• Italy: no growth
• Japanese economy: negative 0.4 percent

Tourism Stocks Slump during Political Rift with China

Alongside the economic contraction, Japan is dealing with an growing diplomatic dispute with China concerning Taiwan.

Stocks in Japan's travel and consumer companies have dropped significantly after China advised its residents to avoid visiting to Japan.

This decision by Beijing intensified a diplomatic feud that was triggered by comments from Japan's recently appointed prime minister about the possibility of deploying forces in the event of a hypothetical Chinese attack on Taiwan.

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

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

"The ongoing tension over Taiwan and China's advisory advising against travel to Japan brings near-term difficulties for consumer-facing sectors.

"Chinese visitors represent roughly 25 percent of Japan's international visitors, making retail outlets, luxury retail, and tourism services especially at risk."

GDP Decline Breakdown

Japan's GDP fell by 0.4 percent in the July-September quarter, as manufacturers' exports were hit by duties levied by the United States recently.

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

Previously, the US administration had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two nations concluded a trade agreement.

Private demand also declined, by 0.3 percent quarter-on-quarter.

On an annual basis, Japan's real gross domestic product shrank by 1.8 percent in the quarter through September.

"Japan's economy was solid in the first half of this year and the latest GDP figures showed that growth is halted for now.

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

The US administration has lately recognized the impact of tariffs on US consumers, lowering tariffs on imported food products including beef, tomatoes, beverages and bananas amid increasing concerns about increasing costs.

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