Japan's economy shrank at its fastest pace in nearly 35 years in the fourth quarter of 2008, joining other major advanced economies in sliding further into recession.
Japan, which is largely driven by exports, suffered a loss of 12.7 percent in its gross domestic product (GDP) in the October-December period last year, a government report said Monday, blaming the worsening situation on plunging external demand, rapid deceleration of the world economy and a stronger yen.
Earlier in October, Japanese Prime Minister Taro Aso had unveiled a 27 trillion yen (275 billion U.S. dollars) stimulus package to bolster the world's second largest economy.
In December, Japan's central bank cut its key interest rate to 0.1 percent, lowering borrowing rates to nearly zero, and adopted new measures to pour more money into the banking system to shake off a widening credit crunch.
These moves in some way helped promote internal demand, but were not enough to instantly pull the export-driven economy out of recession as international demand for made-in-Japan continues to shrink amid the spiraling global economic crisis.
However, Japan is only part of a gloomy global picture. Recent data indicates that the major advanced economies of the world are slipping further into recession despite governments' efforts to stimulate growth.
In the United States, the economy plummeted at an annualized rate of 3.8 percent in the fourth quarter of 2008, the worst since1982, the U.S. Commerce Department said.
According to the country's Institute for Supply Management, economic activity in the U.S. manufacturing sector failed to grow in January for the 12th consecutive month.
Meanwhile, consumer spending, which accounts for two-thirds of overall U.S. economic activity, recorded an unprecedented six-monthly decline last December, indicating that the economy has yet to hit bottom.
The government's newly passed 787 billion dollar stimulus plan, which U.S. President Barack Obama described as a "major milestone on our road to recovery," is yet to be tested for effectiveness, and presidential aides have warned consumers not to expect instant miracles.
Further, the Wall Street Journal quoted economists as forecasting that the United States will see an annualized GDP decline of 4.6 percent in the first three months of 2009 and a 1.5percent decline in the second quarter.
Meanwhile in Europe, flash official figures released last Friday suggest that GDP in both the European Union (EU) and the euro zone contracted steeply in the fourth quarter of 2008, falling for the third quarter in a row.
The 1.5 percent GDP decline in both the euro zone and the EU from the previous quarter is even worse than the 1 percent contraction in the U.S. economy during the same period.
The German economy, which is Europe's biggest, shrank by 2.1 percent in the fourth quarter last year compared with the previous one, representing the biggest decline since the country's reunification nearly two decades ago.
Germany's reliance on exports of goods like cars and factory equipment have made it particularly vulnerable to the global economic turmoil and collapsing world trade.
In Britain, the central bank predicted last Wednesday that the country's economy could shrink as much as 6 percent in 2009 compared with the previous year, with rising unemployment, weak consumer spending and low investment levels threatening to further dampen output.
The economies of France and Italy declined by 1.2 percent and 1.8 percent respectively versus the previous quarter, wiping out any illusion that the euro zone is getting off lightly amid the worldwide meltdown.
Dominique Strauss-Kahn, head of the International Monetary Fund, recently said that leading economies are already in depression, adding that the worst was probably still to come, urging swifter and more determined stimulus action from governments.