The nation's automakers produced 883,962 cars, trucks and buses in July, down 1.2 percent from a year earlier, the Japanese Automobile Manufacturers Association said Thursday.
It was the seventh straight month of decline, the association said.
While domestic sales were favorable in July because of summer bonuses, exports -- particularly to Asian and European markets -- remained sluggish, weighing on domestic auto production, an association official said.
"Japanese automakers are now shifting production bases to Europe, while auto markets in Asian countries have been slowing," she said.
The official added that she expects the slide in exports to continue in concert with the economic slumps in the United States and Europe, while domestic sales are likely to rise when new models are launched in the fall.
Car output in the reporting month fell slightly from a year earlier to 734,748 units, marking the seventh consecutive month of decline.
Output of cars with engines larger than 2,000cc rose 8.4 percent to 321,565 units, while that of cars with engines of between 661cc and 2,000cc fell 5.5 percent to 309,389.
Production of minicars with engines of up to 660cc dropped 6.4 percent to 103,794.
Truck production fell 7 percent to 144,048 units, again marking a seventh straight month of deterioration, while bus production came to 5,166, up 2.8 percent and marking the fourth consecutive monthly gain.
In terms of auto firms, five of 11 companies -- Nissan Motor Co., Mitsubishi Motors Corp., Isuzu Motors Ltd., Suzuki Motor Corp. and Daihatsu Motor Co. -- saw their production fall in July.
Toyota Motor Corp. was the biggest producer, churning out 307,477 vehicles, up 3.7 percent from a year earlier. Toyota was followed by Honda Motor Co. with 117,400 units, up 11.9 percent.
Nissan ranked third with 115,393, down 6.9 percent. Suzuki came in fourth with 82,956, down 1.3 percent, and Mitsubishi was fifth with 71,243, down 22.8 percent.