Consumers around the world no longer want to buy Japanese cars
Japan's current account recorded its largest deficit on record in January, reaching 172.8bn yen ($1.8bn; £1.2bn). It was its first deficit in 13 years.
The current account measures the balance between a country's exports and imports - a deficit means more imports.
Government figures show that exports nearly halved in January, while imports fell by a third.
The country is being hit by falling demand for its products abroad, as the global recession takes hold.
Exports in January dropped a record 46.3% from a year earlier to 3.28 trillion yen, the fourth consecutive month of year-on-year declines, with exports to the US hardest hit, registering a 52.9% drop.
Car exports alone dropped 66.1%, with semiconductor and electronic parts exports down 52.8%.
Tumbling exports have hit companies such as Toyota, which is expected to make its first annual loss in 70 years.
Meanwhile, Honda has had to cut production, and Sony is set to register its first annual loss in 14 years.
Shares tumbled on the news, with the benchmark Japanese index, the Nikkei, closing down 1.2% at a 26-year low of 7, 086 points.
"We incurred the current account deficit due to a plunge in exports. Our exports to key regions, including the United States, Europe and Asia, were all down sharply due to the deteriorating global economy," Michito Yamagami, a finance ministry official said.
Hiroshi Watanabe, an economist at Daiwa Institute of Research, said: "The current account deficit and the dismal exports data clearly reflected weakening demand for Japanese goods amid a global recession.
"Consumers in Asia, Europe, the Middle East and the United States are not buying pricey Japanese goods such as cars and electronic goods.
"Japan's export-driven economy is really engulfed by waves of the global economic crisis."