Japan enters recession

The Japanese economy has entered a recession for the first time since 2001 after shrinking by 0.1 per cent in the third quarter.

In the previous quarter, the economy had contracted by 0.9 per cent, as global demand for the country's products dried up.

Economic and fiscal policy minister Kaoru Yosano confirmed the economy is in a recessionary phase, adding: "Downside risks to the economy are growing further, and Japan is in a very serious situation."

Although Japan has not suffered from the same financial turmoil as the UK and the US, it is heavily dependent on exports and companies such as Toyota have reported a sharp decline in demand.

A strong yen has also been hitting businesses hard, while the stock market has plunged to 26-year lows.

The last time the economy was in a recession was seven years ago, when the dot-com bubble burst.

The government has proposed a $275 billion-stimulus package but the plan has been mired in controversy with confusion as to whether a cash handout to families would make a difference.