Japanese carmakers has said they are cutting back production in China, anticipating lower sales.
That followed widespread anti-Japan protests over a group of disputed islands that has led to showrooms being closed, and in one case set on fire.
Toyota, Nissan, Mazda and Suzuki said they will extend closures for the upcoming national holiday or cut the numbers of shifts worked at their plants.
One industry watcher predicted Japanese sales falling 20 to 30 percent in the world’s biggest car market.
Koji Endo, auto analyst at Advanced Research Japan, said: “The last time we had protests like this in 2010, the effects only lasted about a month, but I think this time is going to be different. This is going to have a serious impact.”
Anti-Japan sentiment in China escalated earlier this month after Japan said it would buy a group of disputed island in the East China Sea, called Diaoyu in China and Senkaku in Japan, from a private owner.
In protests across China, angry demonstrators vandalised properties of Japanese companies, including a Toyota outlet in the eastern city of Qingdao that was torched.
An un-named senior Beijing-based Toyota sales executive told Reuters: “Customers are expressing fears about owning Japanese-branded cars, and that worries me a bit.”
Even before the protests, Japanese auto makers were making cuts due to slower-than-anticipated sales in China this year as the country’s economy grew at its slowest pace in more than three years in the second quarter.
There were also signs the tensions were having an affect on other sectors, most notably airlines, with All Nippon Airways announcing that 40,000 seat-reservations were cancelled for flights between Japan and China from September to November.