The Japanese government said Monday the economy is likely to shrink 3.3 percent this fiscal year, its worst contraction since World War II, as exports continue to plummet. «The global economic crisis and economic downturn is increasing in severity, and Japan's export market is rapidly shrinking,» the Cabinet Office said in a statement quoted by Associated Press. Japan's cabinet had previously predicted the country's gross domestic product would be flat in the current fiscal year through March 2010. It also said GDP, a measure of the total value of a nation's goods and services, is likely to have shrunk 3.1 percent in the fiscal year that ended last month, worse than the previous estimate of a 0.8 percent contraction. With the latest estimates, Tokyo now expects the two-year period to be the worst for the economy in the country's postwar history. The largest previous GDP contraction was 1.5 percent in 1998. But the cabinet said its economic measures will prevent Japan from entering a downward spiral. On Monday, the administration submitted a record extra budget that calls for 15.4 trillion yen ($159 billion) in government spending to finance a new stimulus package. The Finance Ministry last week said Japan recorded its first annual trade deficit in 28 years in the just-ended fiscal year. Japan has heavily relied on foreign sales of its cars and gadgets to drive economic growth, and is reeling from the collapse in global demand sparked last year by the U.S. financial crisis. Its economy shrank an alarming annual 12.1 percent in the October-December quarter, marking the steepest contraction since the oil shock of 1974.
