Contraction in Japanese economy

Rising prices have caused consumers to cut back

The Japanese economy contracted by 0.6% between April and June, prompting fears that it is sliding towards recession.

Declining exports and consumer demand were behind the fall - the first for more than a year - which came after a rise of 0.8% in the previous quarter.

With consumer confidence at record lows, private consumption, which accounts for half of GDP, fell by 0.5%.

Some economists believe the economy will contract in the next three months, partly due to the slowdown in the US.

An economy is considered to be officially in recession after two consecutive quarters of negative growth.

"The data gives the impression that the economy has entered a recession and I think it is in recession," said Takahide Kiuchi, chief economist at Nomura Securities.

GDP, the total value of goods and services in the economy, shrank by 2.4% between April and June, compared with the same period in 2007.

That is a significant change from the first quarter between January and March, when the economy grew by 4% compared with a year earlier.

Figures released last month showed consumer confidence in Japan fell to its lowest level for 26 years in the quarter to June.

As in many economies around the world, rising costs for energy and food have damaged confidence and made consumers reluctant to spend, particularly on more expensive durable goods.