China became Japan's biggest export market in 2007

The gap between what Japan exports and imports fell 20.9% in December from a year earlier to 877.9bn yen ($8.2bn, �4.2bn), the Finance Ministry said.

Exports to China, the United States and Europe all slowed in December, the figures showed.

But for 2007 as a whole the trade surplus rose 37%, representing the first increase in three years.

The data also showed that China overtook the US to become Japan's biggest export market in 2007.

US concerns

"Shipments to the United States will likely continue to be sluggish and those to EU could fall as there are some signs that the slowdown in the US economy is rippling out to Europe," said Takeshi Minami at Norinchukin Research Institute.

"Exports to Asia remain firm, but if the US economy slows further, the impact on the region will be inevitable," he added.

Exports amount to about 15% of Japan's gross domestic product.