Japan expects its economy to contract by 3.3% over the coming year, in what could be the country's worst slump in over half a century.
The news comes as Japan's government prepares to present a 15.4tr yen, (£109bn) economic stimulus package to parliament, the BBC reports.
If projections for the 2009 fiscal year are proved correct, it will be the worst since Tokyo began measuring growth in 1955.
The Japanese economy declined by approximately 3.1% in 2008 and finance minister Kaoru Yosano believes Japan is vulnerable to fresh turmoil overseas.
Yosano says: "Exports have plunged much harder than our expectation."
Government estimates of the decline have been radically revised due to rapidly changing negative economic conditions, according to officials.
"The global economic crisis and economic downturn is increasing in severity, and Japan's export market is rapidly shrinking," says a Cabinet Office statement.
The government says its proposed stimulus plan could boost economic output by 2% this fiscal year. Under the plan, it would issue 10.8tr yen in bonds to cover extra spending, adding to debt pressures.
Meanwhile, investors hope Japan's export market has bottomed. Analysts believe March figures due to be released this week may show factory output in Japan picked up for the first time in six months.
As polls suggest the government is gaining popularity in its efforts to thwart the financial crisis, prime minister Taro Aso is reportedly considering calling national elections.IFAonline
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