Japan is facing its deepest economic crisis since World War II after suffering its worst contraction in almost 35 years.
New figures show Asia’s biggest economy shrank by 3.3% in the last quarter, a steeper rate than the US or the Eurozone.
The decline – at an annual rate of 12.7% - has been blamed on the global slowdown which has crushed demand for Japanese exports, a key pillar of the world's number two economy.
The government said the slump is even worse than the recession of the 1990s which ushered in a decade of economic stagnation and deflation.
The fourth quarter of 2008 was the economy’s weakest performance since the first oil crisis of 1974 and government said this slump would be even more severe.
‘This is the worst ever crisis in the post-war era,’ Economic and Fiscal Policy Minister Kaoru Yosano said, warning that a rebound is impossible before the global economy improves.
‘There is no doubt about it.’
The figures were even bleaker than analysts had expected and marked a sharp deterioration compared with the third quarter's 0.6% contraction.
The current recession will be Japan's ‘longest, deepest and most severe in the post-war period,’ said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong.
Japanese exports plunged a record 13.9% in the fourth quarter as demand for Japanese cars, electronics and other goods slumped in recession-hit overseas economies.
UK borrowing tipped to be €112bn more than expected
Elsewhere, business leaders in the UK say they believe Prime Minister Gordon Brown will have to borrow £100bn (€112bn) more than he plans to stave off a deep and prolonged recession.
The Confederation of British Industry said that even without that additional spending, the UK would be mired in recession all this year, which would also see a significant rise in unemployment.
The statement was issued as car makers BMW announced that it is to lay off 850 workers in Oxford, at its plant where the Mini is manufactured.
