Tokyo, Japan

As demand for Japanese goods declined due to the European debt crisis and Tokyo's territorial row with China, exports in September showed the biggest decline since the earthquake and tsunami in 2011.

Japan's finance ministry announced on Monday that the country's shipments in September fell 10.3 per cent compared to the previous year. This brought last month's deficit to 558.6bn yen ($7 bn).

Shipments dropped by 14.1 per cent to China, which is Japan's biggest market for the last three years. Both countries were engaged in a bitter dispute after the Japanese government purchased the disputed islands of Senkaku that resulted in angry protests from the Chinese and rejection of Japanese products.

Japan's exports to Europe declined by 21.1 per cent, as the continuing euro zone sovereign debt crisis and austerity measures deflated demand.

In addition to falling demand for Japanese goods in major markets, the strong local currency has also reduced competitiveness of the country's exports. Exports of consumer electronics dropped by double-digit figures year on year.

Higher fuel imports, meanwhile, increased by 18 per cent in September to 15tn yen from a year earlier partly due to the rise in fuel prices. Fuel imports account for more than a third of the country's entire imports.

In the quarterly meeting of the Bank of Japan's regional managers, central bank governor Masaaki Shirakawa dismissed concerns over the deficit saying that it was offset by decades of surpluses and assured that the economy was simply "levelling off".

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