Japan's exports plunged 2.6% in July from a year earlier, their steepest drop since February 2021, as shipments to its two largest markets — the United States and China — declined.

The fall was sharper than the 2.1% contraction forecast in a Reuters poll and compared with a 0.5% decline in June.

Imports to the world's fourth-largest economy sank 7.5%, less than the 10.4% fall expected.

Exports to the U.S. also continued to fall, dropping 10.1% in July and slightly softer than June's decline of 11.4%. The U.S. is the largest market for Japanese exports.

Shipments to mainland China — Japan's second largest export market — declined 3.5% compared to the same month last year, but shipments to Hong Kong spiked 17.7%.

The Nikkei 225 declined 0.9% after the release, while the yen

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