TOKYO - JAPAN'S economy shrank in the last quarter by its most since the first oil crisis in 1974, hit by an unprecedented slump in exports, which is likely to lead to more calls for extra stimulus.
Multiple problems
Addiction fear Spooked by sliding U.S Treasuries and reports that the heavily indebted Japanese government may be planning further big stimulus spending, March 10-year government bond futures fell a third of a point.
'There's no question that this is the worst recession in the post-war period,' Economics Minister Kaoru Yosano told a news conference.
Japan's economic crisis worst since WWII: minister
TOKYO - JAPAN faces the worst economic crisis since World War II, its economics minister warned on Monday, after Asia's biggest economy shrank at the fastest pace in 35 years in the fourth quarter.
'This is the worst ever crisis in the post-war era. There is no doubt about it,' Economic and Fiscal Policy Minister Kaoru Yosano said.
Japan has not suffered much directly from the bursting of bubbles in US credit and housing markets, but its heavy dependence on exports and persistently soft domestic consumption has led to a sharper contraction than other major economies.
As the rich world faces its worst downturn in decades, the Group of Seven (G7) policymakers pledged at the weekend to do all they could to combat recession.
Japan's economy shrank 3.3 per cent, or an annualised 12.7 per cent in the fourth quarter of 2008 - three times the fall in gross domestic product in the same quarter in the United States, at the epicentre of the current global crisis.
With exporters cutting production and laying off staff and many retailers reporting sharp falls in sales, economists saw little hope of a bounce back for Japan.
'The data showed a severe picture of the Japanese economy and highlighted the weakness in exports,' said Takeshi Minami, chief economist at Norinchukin Research Institute.
'The January-March quarter is likely to show another minus figure (annualised) in double digits or something close to double digits.'
The government, deeply unpopular with voters and facing an election this year, has so far set out two stimulus packages, and Japanese media said ruling parties were eying a third one that could include up to 30 trillion yen (S$495 billion) in fiscal spending.
However, with parts of the previous packages stuck in Japan's deeply fractious parliament and with Prime Minister Taro Aso's popularity in deep decline, doubts are growing over how long he can survive.
The economy minister also said he was wary about the push from the main ruling party, the Liberal Democrats, to spend more.
'The party may have a plan for additional spending worth 30 trillion yen... but we can't think of good ways to spend that much', Yosano said.
Wary of mounting problems for Japan's economy, the BOJ has nudged interest rates down near zero, taken some unconventional steps including buying of commercial paper, and set up a new funding scheme using corporate debt as collateral. The BOJ, which meets again this week, said last month it expected the economy to contract this fiscal year and in the year from April as consumer prices fall for two years. -- REUTERS
