Page last updated at 07:09 GMT, Monday, 16 February 2009

Japan's economy in quarterly dive

Pedestrians in front of market information in Tokyo, Japan, 12 February 2009
Japanese exports have been hit by the global economic downturn

Japan's economy contracted by 3.3% in the last quarter of last year - its worst showing since the oil crisis of the 1970s, official figures show.

The contraction means the economy shrank at an annual pace of 12.7% during the October to December period.

Economic Minister Kaoru Yosano said Japan faced its worst economic crisis since the end of World War II.

The slowdown in the world's second-biggest economy is steeper than that being experienced in the US or Europe.

Japan has been hit particularly hard by falling global demand for its products.

People had been saying for some time that GDP would be bad, so while the market didn't welcome the numbers there was no excessive reaction
Hiroaki Osakabe, Chibagin Asset Management
Exports, particularly of electronics and cars, have slumped and production has been slashed.

Consumers have cut back too, alarmed by rising unemployment.

"This is the worst economic crisis in the post-war era. There is no doubt about it," Mr Yosano said at a news conference.

"The Japanese economy, whose growth is heavily dependent on exports of automobiles, machinery, and IT equipment, was literally battered" by the global downturn, he said.

Mild reaction

However, Japan's stock market largely brushed off the latest economic news.

The Nikkei share index lost 0.4%, while the broader Topix rose 0.7%.

"People had been saying for some time that GDP would be bad, so while the market didn't welcome the numbers there was no excessive reaction," said Hiroaki Osakabe at Chibagin Asset Management.

How one Japanese worker is coping with the downturn

"The next quarter is likely to also be tough because consumption may well fall off."

Mr Yosano said the government would consider new stimulus measures to aid the economy.

"Japan alone won't be able to recover. The economy has no border. It is our responsibility to rebuild the domestic economy for other countries," he added.

Prime Minister Taro Aso is hampered in his response by a divided parliament and a fractious ruling party.

There were reports over the weekend that he is considering another stimulus package of government spending worth 20 trillion yen ($218bn; 152bn).

But the latest opinion poll has showed that fewer than 10% of people support the prime minister, who must call a general election by September.



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