Japan's foreign ministry said on Friday that 135,078 Japanese nationals lived in China during the year to October 2013, down 10.19 per cent from the previous 12 months.
The drop comes after successive yearly population increases in a country that is a crucial economic partner for Tokyo, despite often-strained ties.
"The decrease can be partly blamed on the worsening view of Japan among Chinese students and business people because of deteriorating diplomatic relations," said Shinichi Seki, an economist specialising in China at Japan Research Institute.
Relations have worsened sharply since September 2012 when Tokyo nationalised islands in the East China Sea that it has administered for over a century under the name Senkakus, but which are claimed by Beijing as the Diaoyus.
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Sometimes-violent anti-Japan street protests erupted across China, with rocks thrown at Japanese diplomatic missions and mobs attacking Japanese businesses.
Although the protests calmed, the row has continued and coastguard vessels from both sides patrol the waters to try to assert sovereignty in what some observers see as a flashpoint issue that could provoke conflict.