'In reality we see few factors that would contribute to positive growth' in the fiscal year starting next April, Economic and Fiscal Policy Minister Kaoru Yosano told reporters.

'If I judge what is happening honestly, I have no confidence at all now that there will be positive growth,' he said, a day after official figures showed Asia's biggest economy is in recession.

The government has never before predicted a contraction for the upcoming year in its annual economic outlook report, which is published each December.

The worst-ever forecast was for zero growth in fiscal 2002.

The Cabinet Office has previously estimated growth of 1.3 per cent in the current fiscal year ending in March 2009 followed by a further 1.6 per cent the following year.

Analysts say those figures now look too rosy. Japan's economy contracted 0.1 per cent in the third quarter after shrinking 0.9 per cent in the second, entering its first recession in seven years, the government reported on Monday.

Although Japan has not suffered financial turmoil on the same scale as the United States or Europe, its trade-dependent economy remains vulnerable to the global downturn.

According to the Paris-based Organisation for Economic Cooperation and Development, the Japanese economy is likely to shrink 0.1 per cent in 2009, while some economists expect an even more severe contraction. -- AFP