Minister: Japanese economic crisis 'the worst since war'

Japan’s economy contracted at the fastest pace in 35 years in the fourth quarter as a collapse in export demand drained life from the world’s second-biggest economy.

Japan’s gross domestic product, or the total value of the nation’s goods and services, dropped at an annual pace of 12.7% in the October-December period, the government said today.

That is the steepest drop for Japan since the oil shock of 1974 and far outpaces declines of 3.8% in the US and 1.2% in the euro zone. A survey of economists by Kyodo news agency had projected an 11.6% contraction.

Japan now faces “the worst economic crisis in the postwar era”, said Economy Minister Kaoru Yosano.

Already, Toyota Motor Corp, Sony Corp and many other companies have announced deep job cuts and projected net losses for the full fiscal year through to March. The yen’s appreciation, which erodes income from abroad has only intensified the pain.

Japan’s economy has now contracted for three straight quarters. Compared to the third quarter, GDP fell 3.3%. If that rate continued for a full year, the economy would contract 12.7%.

For all for 2008, it shrank 0.7% – the first decline in nine years, according to the Cabinet Office.