Flagging exports to China and the rest of Asia are casting a shadow over Japan's growth prospects, with its trade surplus shrinking in May for the fourth time in five months.
When exports to China fell in February from a year earlier for the first time in four years, economists generally blamed it on the timing of the Lunar New Year holidays.
But now they are concerned a slowdown is undeniable after 20 percent growth in exports to China in 2004. "It may be that a slowdown in Chinese demand is becoming more evident," said Seiji Adachi, senior economist at Deutsche Securities.
Shipments to China - now Japan's biggest trade partner and one of the main factors behind its economic recovery in the last few years - fell 0.1 per cent in May from a year earlier, Ministry of Finance data showed today.
The decline was led by automobiles and semiconductor parts, also reflecting China's increasing ability to replace imported machinery and goods with products manufactured domestically and Japanese firms moving production to China.
"More automobiles seem to be produced domestically and supplied to the market," a Japanese Finance Ministry official said.
"As for products related to information technology, there seem to be more cases where Japanese firms are operating in China."
Anti-Japan protests that flared across China in April may also have had some impact as some demonstrators called for a boycott of Japanese products, although the ministry official said it was hard to tell the impact.
Exports to China - which account for 13 per cent of Japan's global exports, second only to 22 percent to the United States - have slowed this year as Beijing sought to cool overheating in parts of its economy, denting demand for raw materials and machinery.