The business sentiment of South Korean firms sharply worsened in August, likely due to Japanese export restrictions and the U.S.-China trade war.

According to the Bank of Korea(BOK) on Thursday, the business sentiment index(BSI) for all industries came to 69 this month, down four points from a month earlier. 

It's the first time the index fell below 70 since February, when it also came to 69. A reading below 100 means pessimists outnumber optimists. 

South Korean manufacturers' sentiment slipped five points to 68 this month, while the BSI for non-manufacturing sectors dropped two points to 70. 

A BOK official said that the declines could be attributed to Japan's export curbs and the trade war between the U.S. and China. 

Meanwhile, local companies' outlook for all industries for next month slightly improved to 72, compared to 71 for this month.