Page last updated at 06:05 GMT, Wednesday, 20 May 2009 07:05 UK

Japan's economy in record plunge

Cranes and containers at Yokohama, Japan (30/03/2009)
Japan's exports have been hit by a collapse in demand

Japan's economy during the first three months of 2009 shrank at its quickest pace since records began, as exports slumped, officials figures have shown.

Output in the world's second largest economy contracted by 4% during the period, or by 15.2% on an annual basis.

Japan's economy, which depends heavily on exports, has been hit hard by the global downturn.

But economists predict a modest growth in the coming months, after a small rise in production in March.

The figures from the Cabinet Office show that this is the fourth quarterly fall in gross domestic product (GDP) in a row, after a 3.8% contraction between October and December 2008.

'Weakness spreading'

The BBC's Roland Buerk in Tokyo says people around the world are buying fewer of the cars and electronic gadgets that Japan is renowned for.

In the first quarter of this year, Japanese exports declined by 26%.

"Weakness in the corporate sector is gradually spreading to households," Prime Minister Taro Aso said during a budget hearing to Parliament.

"This is a very serious situation, so we need to respond appropriately."

Investment in factories and equipment dropped by 10.4% in the first quarter, a sign that firms are reducing their outlay. Consumer spending fell by 1.1% during the same period.

"The savings rate has gone up and that has worsened the severity of the recession," said Richard Jerram, head economist at Macquarie Securities in Tokyo.

"It seems the public has basically panicked about job security to an an extent that hasn't happened in previous cycles," he added.

The latest contraction is the biggest since records began in 1955.

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