Japan’s economy faces an 'unimaginable' contraction, the central bank’s chief economist warned yesterday.

New data 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% month on month in December, is due to announce fourth-quarter gross domestic product data next week. Polls of economists suggest that GDP will have fallen more than 3% compared with the previous quarter – an annualised decline of more than 10%.

Financial Times