In a closely-watched monthly report, the Cabinet Office said on Friday that hopes of a recovery for the world's second largest economy are fading.
Yen tumbles The government's gloomy prognosis sent the yen tumbling on the currency market.
The dollar bought 124.24 yen in late Tokyo trading on Friday, up 0.97 yen from the day before. Output at the nation's factories is falling because electronics companies and other manufacturing sectors are exporting less, it said. Corporate investment has also fallen as Japanese managers spend less money on new facilities and equipment as their confidence in business conditions erodes. One of the most worrying symptoms of Japan's economic malady is deflation, or continuing price declines. With unemployment and bankruptcies at near-record levels, consumers and companies in this country are spending less.