Toyota Motor Corp saw its sales in China fall by half in September compared to August, according to sources, as tensions between Japan and China flared over the Diaoyu islands and anti-Japan demonstrators took to the streets.

As the Chinese market accounts for about 10 per cent of Toyota's global sales, the rapid loss of business is a significant blow to the firm.

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Anti-Japan rallies began in mid-September after the Japanese government put the Diaoyu Islands under "state control". Since then, Toyota said customers to its dealerships in China have decreased and an increasing number of orders have been cancelled.

Toyota sold about 75,000 units in China in August and about half as many in September, according to the sources.

Deteriorating orders for new cars in China prompted Toyota to cut production at Chinese factories in October.

In August, Toyota announced it would increase total global production to 10.05 million vehicles in 2012, a record production target for the firm.

Under the circumstances, Toyota may have to revise its goal.