Japanese retail giant Fast Retailing Co has shuttered nearly one-third of its Uniqlo casual clothing stores in China following anti-Japan demonstrations in the wake of a diplomatic dispute between Asia's two biggest economies over a group of islands in the East China Sea.

The retailer yesterday (18 September) said it has closed 42 of its 145 stores in China and instructed its 200 Japanese employees in the country to stay at home.

"As of now there have been no reports of damage to store facilities or products, or personal injury to employees and their families," the retailer noted, adding that it intends to "closely monitor the situation in China."

The long-standing dispute over the uninhabited islands - over which China claims sovereignty - escalated last week when the Japanese government moved to buy some of them from a private Japanese owner.

The resulting protests in China have also led retailer Seven & I Holdings to close over 200 outlets, with reports adding that Aeon Co has also shut 30 supermarkets in China. Elsewhere, Toyota and Honda are said to have suffered damage at stores in China, while Nissan halted production at two factories.

Fast Retailing was also forced to distance itself from a photo that appeared on the internet showing a sign attached to a window display at one of Uniqlo's stores in Shanghai that read "the Senkaku Islands belong to China."

"This incident did not take place under company instruction," the retailer said, adding that it believes companies should "not take any political stance or voice their opinion regarding diplomatic disputes."