Japanese retail stocks suffered heavy losses today as the market weakened across the board. Shares in retail and tourism-related companies plummeted, with Isetan Mitsukoshi Holdings briefly plunging over 12%, Shiseido dropping more than 11%, and Fast Retailing falling nearly 7%. The downturn followed a warning from China's Ministry of Culture and Tourism advising Chinese tourists to avoid traveling to Japan due to safety concerns.

Adding to the negative sentiment, Japan's latest economic data revealed further trouble. Preliminary statistics released by the Cabinet Office on November 17 showed that Japan's real GDP contracted at an annualized rate of 1.8% in Q3 2025, marking the first negative growth since Q1 2024.

**Retail and Tourism Stocks Hit Hard** At the opening of trading on November 17, Japan's Nikkei 225 Index fell 0.7% by midday, while the Topix Index declined 0.8%. Retail and tourism-related stocks bore the brunt of the sell-off: - Shiseido, a major cosmetics brand founded in 1872, tumbled over 11% intraday. - Isetan Mitsukoshi Holdings, one of Japan's largest department store groups, plunged more than 12%. - MUJI (Ryohin Keikaku) dropped over 9%. - Fast Retailing, parent company of Uniqlo, slid nearly 7%. - Japan Airlines fell close to 6%.

The slump followed China's Ministry of Foreign Affairs issuing a travel advisory on November 14, citing deteriorating public safety in Japan, including unsolved crimes against Chinese citizens and provocative remarks by Japanese leaders regarding Taiwan. The Ministry of Culture and Tourism reinforced the warning, urging Chinese tourists to postpone travel to Japan and advising those already in the country to remain vigilant.

**Airlines Adjust Policies** On November 15, major Chinese airlines, including Air China, China Southern Airlines, and China Eastern Airlines, announced free refunds and rebooking for Japan-bound flights with tickets issued before December 31. Analysts warn that a decline in Chinese tourists—who accounted for a quarter of Japan's foreign visitors in the first nine months of 2025—could significantly impact Japan's tourism sector and hinder sales expansion plans for brands like Shiseido, Uniqlo, MUJI, and ASICS in China. Nomura Research Institute estimates that a sharp drop in Chinese visitors could reduce Japan's GDP by 0.36%, equivalent to ¥2.2 trillion (¥101.16 billion).

**Economic Contraction Deepens** Japan's Q3 GDP shrank 0.4% quarter-on-quarter, driven by a 1.2% decline in exports due to U.S. tariff policies. Weak domestic demand also contributed, with private consumption rising just 0.1% and corporate capital investment increasing 1.0%. However, residential investment plummeted 9.4%, dragging overall growth down by 0.2 percentage points. The Cabinet Office has slashed its FY2025 growth forecast from 1.2% to 0.7%, citing U.S. tariffs and sluggish consumption.

Meanwhile, the Japanese government is reportedly considering a ¥17 trillion ($110 billion) stimulus package, potentially funded by a supplementary budget of around ¥14 trillion—a move that could further strain Japan's public debt.