Japan's industrial output decreased due to lower demand
Japan's industrial output fell for a second straight month in August, showing how Europe's debt troubles and China's slowdown affects the export-reliant economy.
Manufacturers surveyed by the Trade Ministry expect output to fall by 2.9% in September and remain flat in October.
Official data showed that the output fell by 1.3% from the previous month and by 4.3% compared to a year earlier, while analysts were expecting a 0.4% drop.
The drop in exports to China was most worrying, as China is Japan's biggest export market.
"The numbers turned out quite weak," said Takeshi Minami from the Norinchukin Research Institute in Tokyo.
"Demand for products like electronic components seems to be slowing globally, but notably in China," he added.
Mr Minami said that an on-going territorial dispute with China over islands in the East China Sea was also one of the influencing factors. Japan's nationalisation of three islands in the chain called Senkaku in Japan and Diaoyu in China earlier in September generated anti-Japan movement across China.
Many Japanese companies have been the target of anti-Japanese sentiment in China. Major Japanese companies were even forced to close factories.
Auto giants Toyota and Nissan announced they would cut production in China because demand for Japanese cars has dropped. Also, airlines have seen large cancellations of seats on China-bound flights.
"Given troubled ties between Japan and China, the environment surrounding exports to China could become even tougher," said Mr Minami.
According to the Ministry of Economy, Trade and Industry, the main contributors to the drop in output were electronic parts and devices, information and communication electronics equipment and chemicals.