Page last updated at 04:50 GMT, Tuesday, 9 December 2008

Japan sinks deeper into recession

By Duncan Bartlett
BBC News, Tokyo

A pedestrian passes before a share prices chart in Tokyo
Japan is the world's second-largest economy

Japan has sunk deeper into recession in the three months to September than had been expected, new figures indicate.

The economy, the second largest in the world after the US, shrank by 0.5%, for an annualised rate of 1.8%, significantly greater than expected.

Japanese firms are closing factories and laying off staff in the face of declining demand and a rising yen.

Prime Minister Taro Aso has promised public spending to soften the impact of the recession.

There has been an almost constant stream of bad news from Japanese companies over the past few weeks, so it does not come as a great surprise that the recession in Japan is deepening.

What is alarming is how quickly the situation is getting worse.

Gross Domestic Product (GDP), which measures the output of the country's goods and services, dropped an annual rate of 1.8% in the latest quarter - a much steeper decline than even the most pessimistic economists had predicted.

Bankruptcies have been rising among small companies, while big firms such as Sony and Toyota have seen their profits decimated by a slump in sales and a rise in the value of the Japanese yen.

Many people blame the Prime Minister Taro Aso for allowing the recession to get worse.

Opinion polls suggest only one in five voters still back him.

Mr Aso has promised to increase public spending and help families and small businesses, but some of his plans have been met by scepticism from the public and opposition from within his own political party.

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