Japan GDP shrinks by most in 35 years

Japan's economy, battling its worst downturn since the oil crisis of 1974, shrank last quarter by the most in 35 years.

Gross domestic product fell 3.3%, or an annualised 12.7% in the fourth quarter of 2008 as the country's reliance on exports becomes its Achilles heel. The only bigger contraction was a 3.4% quarterly slump in 1974, after the first Middle East oil shock.

The crash in economic activity was three times as bad as in the US for the same period.

"There's no question this is the worst recession in the post-war period," Economics Minister Kaoru Yosano said.

The government had to pursue all options to keep the economy afloat, he said, but then seemed to talk down prospects for large-scale spending, saying Japan could not get "addicted to pain killers".

As the rich world faces its worst downturn in decades, the Group of Seven pledged at the weekend to do all it could to combat recession.