Toyota drops output

The car giant says it will change production at plants in China and a Lexus factory in Japan. The move signals the possible onset of a more prolonged chill in economic relations between the world's second and third-largest economies.

Chinese anger over Japan's decision earlier this month to purchase a set of disputed East China Sea islands it administers has spilled over into the economic realm, first in the form of sometimes violent protests targeting Japan's factories and showrooms in China and, more recently, through aversion to Japanese brands.

Economists warned that the souring of trade ties could dim growth and threaten global supply chains. "There is a real risk this feud between China and Japan could push down exports, which would dim their (respective) economic outlooks,'' said Long Hanhua Wang, a Tokyo-based economist for RBS Securities Japan.

Both governments have been careful not to invoke the spectre of economic sanctions, but Japanese companies have reported unusually strict inspections by Chinese Customs officials and delays in processing at some ports in China.

The Japan External Trade Organisation has cited reports of problems with Customs affecting Japanese goods at Shanghai and Shenzhen. China-based operations of Japanese carmakers, many of which already faced slowing Chinese sales last month as tensions mounted, have been hit by much of the anger directed at Japan.

Dealerships run by Toyota, Nissan and Honda suffered damage in several cities. As a result of that and a drop in orders, all three temporarily suspended operations last week before resuming output.
 

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