Japan's economy shrinks by most since earthquake
11/12/2012 9:11:15 AM

The country is being hit hard by a global slowdown and reduced demand for exports in places such as China and Europe. 

Japan's Cabinet Office released the GDP figures on Monday and many economists were surprised that the numbers were worse than expected. 

"The decline in exports seems large. Consumption and capital expenditure were also weak, showing that both external and domestic demand are weak," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo told the BBC.

"Economic data deteriorated sharply from September, and this means Japan is already in recession," he added.

The Financial Times reports that it's likely that Japan has entered its fifth technical recession of the past 15 years.

“The question is how long and deep this downturn will be, and how policy makers will react,” said Masamichi Adachi, a senior economist at JPMorgan in Tokyo, told FT before the release of the data.

Japan has struggled to regain its economic footing since it was hit by the earthquake and tsunami of March 2011. Economic figures rebounded in the first half of the year, driven by cleanup and redevelopment efforts from the tsunami,reports the Financial Times. 

State subsidies that encouraged consumers to buy fuel-efficient cars also helped boost the bottom line. 

But slower sales from China, its largest trading partner, is hitting the world's third largest economy hard. 

CNN reports that nearly 20 percent of Japanese exports last year were sold to mainland China, compared to 15.3 percent exported to the US, citing figures from the Japan External Trade Organization.

The Bank of Japan recently announced new efforts to help shore up the economy. In late October the central bank announced it was putting another 11 trillion yen ($137 billion) into its asset purchase program, which includes treasury bills and bonds, in hopes it will help stimulate the economy. 

After the GDP announcement, Japan's Nikkei index was down almost 1 percent in morning trading in Tokyo.