Japan's economy could be at risk as the country shipped almost $700 billion worth of goods last year, with China and the US its main trading partners. Cars, computers and other electrical equipment could be hit. Our correspondent Terrence Terashima reports.

Japan's economic recovery has faced a number of bumpy roads in the past six years, but many say it has never been as bad as potential impact from the trade war between China and the US. Central Bank governor Haruhiko Kuroda said, Japanese economy could suffer quite significant consequences if escalation of tariffs continues.

For the moment, impact is limited. Although steel and aluminium tariffs were imposed on Japan, it is very limited and the Japanese yen remains comparatively weak against the dollar, and trade remains stable. However, situation could easily turn for the worst.

MARTIN SCHULZ, SENIOR RESEARCH FELLOW FUJITSU RESEARCH INSTITUTE "Either if there will be major tariffs on Chinese exports, because Japan produces a lot in China, for productions that is being exported towards the US, the other big problem could arise if the currency war is evolving because of the tariffs the Chinese renminbi can be weaker in the future that would have big impact on Asia and on Japan."

TERRENCE TERASHIMA TOKYO "The two that will have strong impact from this trade war are the auto sector and the currency market which will in turn will put grave pressures on the slowly recovering Japanese economy."

With Japan's two largest trade partners intensifying trade dispute, experts say there is a mounting risks of financial market instability and a survey showed a drop in business confidence among large manufacturers, including automakers and electronics companies. Japan is aggressively seeking multilateral trade agreements to minimize these impacts.

MARTIN SCHULZ, SENIOR RESEARCH FELLOW FUJITSU RESEARCH INSTITUTE "Japan is refocusing its interest towards partners in Asia and the EU. We see this in the negotiation in trade agreements with the EU and RCEP in Asia. So policy in the US brings actually new partners closer together which might not be a bad side effect."

Japanese government spokesman said Japan will maintain vigilant eyes on the trade dispute, but did not elaborate on its stance. Terrence Terashima, CGTN, Tokyo.