Japanese exports fell at their fastest pace in almost seven years in October as Asian demand cooled, pushing the world`s second biggest economy deeper into recession, official data showed Thursday.

In an ominous sign that the US-born financial crisis is sweeping deeper into Asia, Japan`s exports within the region dropped for the first time in 80 months as once-buoyant shipments to China started to fall.

Total exports fell 7.7 percent from a year earlier, the first drop in four months and the steepest decline since the 2001 recession after the dotcom bubble burst, according to data from the finance ministry.

The drop suggests Japan`s recession-hit economy may have an even worse fourth quarter than previously expected, said UBS economist Akira Maekawa.

`It`s very likely that the Chinese economy will slow down further next year, which will inevitably affect Japan`s economy,` he said.

The slump in global demand for Japanese products pushed the trade balance into an unexpected deficit of 63.9 billion yen (665 million dollars), much worse than a year-earlier surplus of 999.4 billion yen.

The deficit, the first since August, missed the average market forecast for a surplus of 104.8 billion yen. Japan`s Nikkei index plunged five percent in afternoon trade as the figures added to worries about the global recession.

The surplus with the rest of Asia shrank 38.7 percent as exports fell 4.0 percent. The deficit with China expanded 27.3 percent as exports to Japan`s biggest trading partner dropped 0.9 percent.

`In addition to the higher yen, the economic slowdown in China is becoming a factor pushing down Japanese exports,` said a finance ministry official.

Analysts said Japan`s exports would likely keep falling through next year. Maekawa sees a 6.8 percent drop for the whole of 2009.

In October shipments of automobiles plunged 15.0 percent by value while those of electronic devices sank 12.6 percent.

Imports rose 7.4 percent, up for a 13th consecutive month, due to high energy costs.

The surplus with the United States dropped 27.5 percent while that with the European Union shrank 24.8 percent.

Japan confirmed this week that its economy was in recession for the first time in seven years as companies slash investment to weather the financial crisis.

Japan`s economy contracted by 0.1 percent in the three months to September, after shrinking 0.9 percent in the second quarter of the year.

The country has historically enjoyed a large trade surplus thanks to brisk demand for its cars and other goods.

But the global economic crisis and a stronger yen are now taking a heavy toll on its export-dependent economy.

In August Japan logged its first trade deficit in 26 years excluding the month of January, when exports tend to be slow due to New Year holidays.