The economy shrank at an annualized pace of 0.4 percent in the three months through September, posting its second consecutive quarter of negative growth amid the global financial crisis and indicating Japan has entered a recession for the first time since 2001.

Economic and Fiscal Policy Minister Kaoru Yosano KYODO PHOTO

The Cabinet Office, in a report issued Nov. 17, said weak domestic demand and a rise in imports led gross domestic product to contract for the second straight quarter, following an annualized 3.7 percent fall in April-June.

The GDP figures "show that the economy is in a recessionary phase," defined as two successive quarters of contraction, Kaoru Yosano, economic and fiscal policy minister, told reporters.

"As the global economy is expected to slow down for the time being, downward movement (in Japan) is expected to continue," Yosano said.

GDP, the broadest measure of economic activity, contracted 0.1 percent in July-September from the previous quarter.

In nominal terms, unadjusted for price changes, the economy contracted 0.5 percent in the quarter, or an annualized contraction of 2.1 percent.

Major private-sector think tanks had believed the economy remained at zero growth in real terms in July-September.

"Basically, this came within (experts') earlier projections," said Yasutoshi Nagai, chief economist of Daiwa Securities SMBC.

Nagai expects the economy to continue to post negative growth until around the January-March quarter, as overseas economies will remain stagnant.