Japan, which accounts for 7% of world output, has entered a recession after posting two consecutive quarters of negative growth. The Japanese economy contracted by 0.9% between April and June and a further 0.1% since September.
Kaoru Yosano, the Japanese minister of fiscal policy, said "The downtrend in the economy will continue for the time being as global growth slows down. We need to bear in mind that economic conditions could worsen further as the US and European financial crisis deepens, worries of economic downturn heighten and stock and foreign exchange markets make big swings."
The Nikkei 225 stock index has fallen 40% since the beginning of the year, and has lost a quarter of its value during this month. After the news was announced the index dipped, then rose to close up 0.7%.
Japanese companies lose large sums whenever the yen's value surges. With the yen viewed as relatively stable during financial turmoil, the value against the US dollar has risen greatly.
JPMorgan Chase economist Masamichi Adachi said, "It's only going to get worse. Japan may be entering its deepest recession in a decade as the global financial crisis cools demand." Japan has not been in recession since 2001.
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