Japan's economy shrank for a third straight quarter in the last three months of 2004 as export growth and personal consumption weakened, marking the country's fourth recession in less than a decade.
Gross domestic product (GDP) fell 0.1 per cent in real, or price-adjusted, terms in October-December, worse than a forecast for 0.1 per cent growth and confirming that the strength of Japan's latest recovery has waned since it started two years ago.
"There are three quarters now of negative growth, so Japan is really struggling in this recovery," said Mr Paul Sheard, chief economist at Lehman Brothers Japan.
The data also show that two of the world's biggest economies are either in or close to recession after Germany said this week its economy shrank by 0.2 per cent in the fourth quarter.
On an annualised basis, Japan's GDP shrank a real 0.5 per cent in the fourth quarter, worse than a median market forecast of 0.5 per cent growth, the government data showed today.
Economists expect GDP for January-March to rebound as consumption picks up with better income and job conditions. They also cited a recent boost in machinery orders as a positive sign of future corporate investment.
Prime Minister Mr Junichiro Koizumi maintained the government's view that the recovery remained intact in the bigger scheme of things, a view shared by Economics Minister Mr Heizo Takenaka. "Basically, the economic recovery is continuing. It's just that consolidation is being protracted," Mr Koizumi told reporters.