The ongoing territorial dispute between China and Japan has led to a huge outflow of investments from China and into Southeast Asian countries, latest data showed.

China is Japan's largest trading partner.

The Japan External Trade Organization (JETRO) noted that Japanese investments in Southeast Asia in 2014 were three times the amount it invested in China.

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Japanese companies in 2013 directed US$22.8 billion of their investments to Thailand, Singapore, Malaysia, Indonesia, Vietnam and the Philippines compared to only US$8.7 billion in China.

While Japanese investments in Southeast Asia have doubled, investment into China plummeted by 18 percent in 2013 compared to 2012.

That China remains outside the radar screens of Japanese investors can be seen in data showing that only 55 percent of Japanese firms plan to expand their operations in China.

Hiroyuki Ishige, chairman of JETRO, said Japanese companies view China's economy and political situation as posting "a considerable amount of risk."

Relations between Japan and China worsened dramatically in 2012 as a result of an intractable dispute over the Diaoyu or Senkaku Islands in the East China Sea.

Beijing also perceives Japanese Prime Minister Shinzo Abe as an unrepentant militarist in denial of Japanese atrocities during the Second World War.

Higher wages in China are driving away Japanese companies that set up shop in China in the first place to take advantage of China's low labor costs.

Average salaries in China are now higher than Thailand, according to a survey conducted by JETRO between October and November 2013.

Labor costs in Indonesia and the Philippines are one third lower than China's while Vietnam's is less than half of those in China.