Japan's economy shrank an annualized real 1.1 per cent in the fourth quarter of 2010, marking the first contraction in five quarters, the Cabinet Office said Monday.
The October-December period figure, measured by gross domestic product, means a 0.3 per cent fall from the previous three-month period.
The figures beat forecasts of an annualized 2.2 per cent contraction and 0.6 per cent quarterly decline in a Kyodo News survey. Analysts said the downturn was a natural result of the slowdown in exports and weaker domestic consumer demand.
Japan's real GDP grew 3.9 per cent in 2010, according to Government statistics. A nominal GDP of 5.474 trillion U.S. dollars only secured a third spot for Japan in the world, behind the United States and China.
Japan's Economics Minister Kaoru Yosano said he welcomed China' s advancement as the world's second-biggest economy.
Despite its quarterly GDP contraction, analysts believed signs of recovery are seen in Japan's economy. Its exports accelerated for a second month in a row in Dec. and picked up briskly in 2010 from a year earlier, thanks largely to the robust demand from China and other Asian economies.