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Japanese economy tanks

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 dropped at an annual pace of 12.7 percent in the October-December period, the government said yesterday.

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

Japan now faces "the worst economic crisis in the postwar era," according to Economy Minister Kaoru Yosano.

Already, Toyota Motor Corp, Sony Corp and a slew of other companies have announced deep job cuts and projected net losses for the full fiscal year through 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 percent.

For all for 2008, it shrank 0.7 percent - the first decline in nine years.

Martin Schulz, an economist at Fujitsu Research Institute in Tokyo, said that the three main pillars that lifted Japan out of the so-called "lost decade" of the 1990s had crumbled - favorable exchange rates, overseas investment and demand, and old industry such steel, cars and chemicals.


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