Japan’s economy shrank at the fastest rate in five years at the end of 2019 as it was hit by a sales tax rise, a major typhoon and weak global demand.
Annualised gross domestic product (GDP) fell by a much steeper than expected 6.3% in October-December.
There are also concerns the coronavirus outbreak will mean the slump continues this quarter.
That has raised fears that the world’s third-biggest economy may fall into recession.
During the period Japanese consumer spending fell 2.9% after the country’s sales tax was raised in October to 10% from 8%. In the same month Typhoon Hagibis hit large parts of the country.
Last quarter, capital spending dropped by 3.7% and exports slipped 0.1% amid the ongoing US-China trade war.
Investors are now watching to see whether the economy will rebound after the coronavirus forced China to shut down factories and led to a big drop in Chinese tourists visiting Japan.
In response to today’s data economy minister Yasutoshi Nishimura said the Japanese government was ready to take all necessary steps to deal with the impact of the coronavirus outbreak on the economy and tourism.
In December Prime Minister Shinzo Abe’s government approved $120bn (£90bn) in spending aimed at cushioning the impact of the sales tax rise.
The shrink in GDP was the first in more than a year and the largest since a 7.4% fall in 2014, the last time Japan raised its sales tax.