UPDATE: Peter Alford | February 16, 2009
JAPAN'S economy, the world's second-largest, shrank at the rate of almost 13 per cent in the final three months of 2008.
Round two: The Japanese economy will soon see a second financial stimulus program, the third since September 2008. Picture: Bloomberg
In real terms, adjusted for deflation, Japan’s gross domestic product fell 3.3 per cent on the previous quarter, or 12.7 per cent annualised.
The contraction is Japan's sharpest in almost 35 years, since the first "oil shock" of 1973/74.
By at least one definition - a deep recession in which annual GDP falls by 10 per cent or more - Japan is headed into a depression.
Economy Minister Kaoru Yosano said today the Government would soon produce another economic stimulus programme, the third since September.
"Doing nothing after we see these miserable economic numbers is tantamount to the negligence of our duty."
However, the Taro Aso Government's attempts to revive the stalled domestic economy in Japan - Australia’s biggest export destination - are entangled in a crippling dispute with the Opposition-controlled Upper House, which threatens to delay stimulus efforts already contained in the national budget beyond the April 1 start to the new financial year.
As expected, a collapse in exports drove national output into the ground, but the numbers - which are incomplete and subject to later adjustment - are far worse than the December-quarter performances of the other major economies.
The US economy contracted 3.8 per cent in the same quarter and the eurozone economies together shrank by 1.5 per cent, though that was the worst figure since European monetary union was activated in 1998.
Exports contributed to a decline of three percentage points, or minus-13.9 per cent annualised, in December quarter GDP.
The December period was the third successive quarter of economic contraction for Japan, although the official panel reporting to the Cabinet Office has recently defined the current recession as having started in November, 2007.
By either measure, the Japanese economy is headed for its longest and probably deepest post-war period of recession.
Although many economists expect the rate of contraction to bottom out around mid-year, hardly anybody now expects the economy will resume positive growth before 2010.
Takeshi Minami, chief economist at Norinchukin Research Institute, said: "I think double-digit contraction is continuing in the current quarter.
"Exports are stagnant - they are the core of the Japanese economy. And local demand is also very bad."
Peter Alford is The Australian's Tokyo correspondent