Japan faces 'unimaginable' contraction

http://us.ft.com/ftgateway/superpage.ft?news_id=fto020920091358127080

Japan's economy faces an "unimaginable" contraction, the chief economist of its central bank warned on Monday, as figures revealed surging bankruptcies and a big fall in machinery orders.

The warning from Kazuo Momma, head of the Bank of Japan's research and statistics department, underscored the gloom surrounding the world's second-largest economy as export orders dry up, companies shut down production lines and consumers stop spending.

Japan, where industrial output plunged a record 9.6 per cent month on month in December, is due to announce fourth-quarter gross domestic product data next week. Polls of economists suggest GDP will have fallen more than 3 per cent compared with the previous quarter - an annualised decline of more than 10 per cent.

"From October to December the scale of negative growth [in GDP] may have been unimaginable - and we have to consider the possibility that there could be even greater decline between January and March," Mr Momma said in a speech on Monday.

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