Japan has suffered its sharpest fall in exports on record as even previously robust markets hunker down against the shockwaves of the global financial crisis.

The slump in demand for the output of the powerful – and economically pivotal – Japanese export sector comes amid gloomy prognostications about the prospects for the world’s second largest economy.

Japan’s cabinet office yesterday cut its forecast for the third month in a row, declaring that the recessionmired economy was 'worsening' in the face of the trade slowdown, falling corporate profits, rising unemployment and weak private consumption. “The economy is likely to continue worsening for the time being,” the office said.

Financial Times