Financial markets showed little reaction to the trade data as they remain preoccupied with lingering uncertainty over the impact of market turmoil on the global economy.
"Exports to the United States fell, but not to such an extent that showed subprime problems were taking a severe toll on Japanese exports," said Takeshi Minami, chief economist at Norinchukin Research Institute. "But it is worrying that a slowdown in exports of cars and construction machinery is becoming noticeable."
Exports to the United States fell 1.5 percent from a year earlier as the world's largest economy suffers from subprime problems and resulting market woes, data from the Ministry of Finance showed on Wednesday.
It followed a 9.3 percent drop in September, the biggest decline since November 2003. It was the first time exports to the United States fell two months in a row since April-May 2004.
But those to China increased 19.2 percent and those to Asia rose 12.9 percent. Shipments to the EU jumped 23.7 percent, supporting overall export growth.
China is seen overtaking the United States as Japan's biggest export market for the first time in modern history this year as the booming Chinese economy attracts a wide range of Japanese products from machines to steel.
Even so, the U.S. economic outlook remains crucial to the Japanese economy as a big portion of Japan's exports to China consists of machine parts that are assembled and then sold to the United States.
"There are worrying signs of a slowdown in U.S. personal consumption," said Junko Sakuyama, economist at Dai-Ichi Life Research Institute. "If the U.S. economic slowdown is prolonged, strong demand in Asia and emerging nations may not be enough to keep exports strong."
Japan's trade surplus rose 66.1 percent in October from a year earlier to 1.0186 trillion yen (US$9.27 billion), below analysts' median forecast for a 71.5 percent rise in the surplus to 1.0522 trillion yen.
Exports increased 13.9 percent from a year earlier to a record 7.5155 trillion yen, compared with economists' median forecast for a 12.4 percent rise, while imports rose 8.6 percent, against the market consensus for a 7.3 percent gain.
Resilient exports helped push up Japan's economic growth to a firm 0.6 percent in the July-September quarter from the preceding three months, or an annualised 2.6 percent.
But economists expect the world's second-largest economy to grow at a slower pace in October-December as support from exports is seen easing on a further U.S. economic slowdown and higher oil prices.
The cloudy outlook for the U.S. economy and global markets has pushed back expectations for a rate hike by the Bank of Japan from the current 0.5 percent level.
"I expect Japanese exports to slow down more than the BOJ thinks in the coming months, as I doubt exports to Europe will continue to grow so strongly," Minami said. "Given such risks ahead, I still think the BOJ cannot raise rates at least until July-September next year."
Swap contracts on the overnight call rate do not fully price in a BOJ rate hike to 0.75 percent until the end of next year. The central bank's policy board meets next on Dec. 19-20.