Japan has slipped back into recession after the economy shrank much more than expected in the early part of this year.
The follows the March earthquake, tsunami and nuclear crisis which hit business and consumer spending and massively disrupted supply chains to manufacturers.
The Japanese government believes the effect is only temporary.
Chief Cabinet Secretary Yukio Edano admitted that the earthquake on 11 March had a major impact on the Japanese economy and said: “While there may be differences in the speed at which the recovery progresses, I have no doubt that the recovery is progressing.”
Even before the disaster Japan’s economy was struggling.
The government now says GDP fell three percent at the end of 2010, compared with the same period a year earlier, due to weaker exports and consumer demand.
Between January and March the economy slumped 3.7 percent on an annualised basis.
Economists said the grim numbers may point to a slower recovery. Some were surprised at how quickly Japan’s economy crumpled after the earthquake and tsunami as the latest GDP report covers a period that includes just 20 days following the disaster.