Japan's economy may shrink at an annual 6.5 percent pace this quarter, Bank of America Corp. said after reports last week showed industrial production and exports posted their biggest declines on record.
Gross domestic product in the three months ending Wednesday will decline more than the 2.7 percent previously predicted, said Tomoko Fujii, head of Japan economics and strategy at Bank of America in Tokyo.
Companies from Toyota Motor Corp. to Sony Corp. idled plants and fired workers this quarter as recessions in the U.S. and Europe caused sales of cars and televisions to collapse. The global slump is spreading to developing markets including Asia, the destination for about half of Japanese exports.
"External demand has vanished all of a sudden," Fujii said. "Almost every industrialized nation is in a recession. Even in China, growth is slowing sharply."
A 6.5 percent annualized contraction would be the steepest since the first quarter of 1998, when the Asian financial crisis and a consumption tax increase led to a 7.5 percent decline. The economy shrank in each of the past two quarters.
Factory output plunged 8.1 percent in November from October, the most since comparable data were first kept 55 years ago.