Driven by declining exports to China and Europe, Japan posted the widest trade deficit since 1979, standing at 517.3 billion yen ($6.53 billion) in July, Nikkei reported Wednesday.
According to data released Wednesday by the Ministry of Finance in Japan, the deficit, 2.9 percentage points higher than expected, came as exports dropped 8.1 percent year-on-year to 5.3 trillion yen, due to shrinking Chinese and European orders for Japan-made goods.
The decline was the largest in six months, and the drop was mainly caused by shrinking exports of power equipment, electronic components and auto parts, Nikkei reported.
Imports increased 2.1 percent year-on-year, mainly caused by the increasing demand for liquefied natural gas after the shutdown of the nuclear power plants.
Japan's exports to China, the country's largest importer, fell 11.9 percent last month.
"The slowdown of the GDP growth in China has directly caused the sharp drop in Japan's exports. China's domestic demand for electronic components and machinery is shrinking due to the economic downturn," said Ni Yueju, an expert on Japanese economy at the Chinese Academy of Social Sciences (CASS).
Ni speculated that the trade deficit would be expanded in the coming months, as "trade between Japan and China might be affected by the worsening bilateral relationship."
The recent disputes over Diaoyu Islands have created tensions in the relations between Japan and China. Massive anti-Japanese protests have been held in some major cities, calling on the Chinese to boycott Japanese products, Ni said.
"The Japanese economy is reliant on exports and it will be hit if exports to China dwindle," said Yao Haitian, another expert on Japanese economy at CASS.
