(Financial Times) -- Toyota Motor is cutting production of vehicles for the Chinese market in a sign of the deepening economic impact of anti-Japanese demonstrations that swept the country this month.

Like many other Japanese companies, Toyota closed factories in China for several days amid the protests. Its factories are now operating again, but in some cases output is lower than it was before the shutdowns, the company said on Tuesday. "We are adjusting production on a business-by-business basis, taking into account the present situation with orders and sales," Toyota said, though it declined to give specific figures.

The carmaker's decision underscores the risk of lasting fallout for businesses from the maritime dispute between Asia's two largest economies.

Toyota and other Japanese manufacturers were easy targets for Chinese rage over Tokyo's purchase of the Senkaku islands -- known as the Diaoyu in China -- from their private owner. Attacks on Japanese-made vehicles during the protests were caught on television and are likely to put off even politically ambivalent Chinese buyers.

 

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Japanese carmakers were already struggling to hold their market share in China against advances by US and European rivals.

John Zeng of LMC Automotive in Shanghai said the collective share of Japanese carmakers has fallen to 22.8 per cent from 26.6 per cent in 2009. In August, as the Senkaku dispute was gathering steam, German carmakers outsold Japanese groups for the first time.

"With the introduction of a large number of high-tech Volkswagen vehicles in China, Japanese compact and midsized cars are being attacked by German or even Korean cars," Mr Zeng said.

Toyota had expected to sell 1m vehicles in China this year, or just over a tenth of its projected worldwide sales. Falling demand in China could also affect its production in Japan. The Nikkei business daily said output at a Lexus plant in southern Japan that makes luxury vehicles for export to China and other markets was being cut by 20 per cent.

Nissan, which depends on China for a higher percentage of its sales than Toyota, declined to comment on production levels but suggested it might make adjustments in the coming months. "The situation from October onward is still fluid," it said.

China is Japan's biggest trading partner while Japan is China's second-biggest after the US, and the economic fallout from the dispute in the East China Sea has already been felt in other sectors.

Japanese shipping companies have reported unusual delays at Chinese ports, while China's tourism bureau issued a travel warning for Japan last week. Japan Airlines said it would cut flights to Beijing and Shanghai in response to tens of thousands of cancellations.