The news helped drive Tokyo's Nikkei stock index down more than 7% to a new five-year low at one point yesterday, amid fears about the global recession.
Official figures government figures show that the fears that the country's export-dependent economy is in a recession, seem to be well placed.
Growth did contract in the June quarter, but the flagging export performance and weakening industrial production figures are suggesting even more strongly that the economy contracted in the September quarter.
The steep fall came as exports to the ailing US economy declined for a 13th straight month, while exports to Asia - which have held up sort of OK, showed another month of tepid growth (2.9%).
At current exchange rates, the September surplus of 95.1 billion yen was $US973 million, sharply lower than forecasts for a figure of about 546 billion yen.
It followed a deficit of 324.0 billion yen in August, which was the first in 26 years excluding January when exports are usually slow due to the New Year holiday.
Imports rose 28.8% in September while exports edged up just 1.5%, thanks to falling shipments to the United States and western Europe.
Figures from the Finance Ministry showed the exports to the US fell 10.9% in September (after a 22% fall in August), 9% to the European Union. Exports to China rose 1.7% in September from September 2007.
The higher yen isn't helping, (it's up more than 8% in this month alone, so far) nor is the rapidly sinking US economy as consumers shut their wallets. US car sales are slumping, leading to falling exports from the likes of Toyota, Nissan and Honda.
For the six months to September, the first half of the fiscal year, the trade surplus shrank a massive 85.6% from the same six months of last year.
Continuing high energy costs continued to undermine the trade balance with September seeing imports of crude oil jump 61.7% in value, while coal imports surged 105.9% (that's because of the doubling and more in the cost of coking coal and thermal coal imports from Australia, Canada, Indonesia, South Africa and other suppliers).
The Nikkei tumbled 6% to 8151.29, the lowest since May 2003 in Tokyo. The yen traded at 97.63 per dollar from 97.74 before the report was published, and has gained 8.7% this month, adding to exporters' woes.
But it recovered somewhat in later trading to finish down just 2.9%. Mazda fell 11%.
After the bell though the huge Sony electronic company revealed that its 2009 operating profit could plunge 57% to just over $US2 billion because of falling exports from Japan, dropping sales of big TVs and other high end products, and the rising yen.
It was a gloomy report and the giant is having a top level board and management meeting in Tokyo next week to discuss measures to meet the earnings slump. The slump in the US and Europe are taking a deep on Sony's sales and profits
The country's car giants have been especially hit: domestic sales are falling and sales in their main export markets in the US, Western Europe, and smaller markets like Australia are weakening. Toyota is expected to reveal a halving of profit when it reports first half results on November 6.
China is even seeing sales slowing very sharply and Russia is expected to slump after the financial problems experienced there in the past six weeks.
Nissan has joined Toyota and other carmakers in reducing domestic output.
