Japanese car sales have plummeted at a pace not seen since the bleak economic days of the early 1970s.

Confirming new fears that Japan has crashed into its sharpest downturn since the Second World War, November sales of cars, trucks and buses plunged 27.3 per cent from the previous year.

Car sales are taken as the earliest and most sensitive monthly gauge of consumer sentiment in the world’s second biggest economy.

The shock report follows equally grim figures released before the weekend showing Japanese global auto exports dipped over 4 per cent in October.

In the breakdown of the report, there was, as expected, sharp decline in sales to the US and Europe, but the major Japanese car manufacturers were visibly shaken by the acute drop in sales in emerging markets.

Sudden sales dives in Russia and South America were bad but the 0.5 per cent drop in sales to Asia was taken by analysts as a sure sign of a bigger capitulation in China than many have anticipated.

Even before the export drop was made official, the car companies knew about the giant inventories of unsold vehicles accumulating around the world. Over the past few months, the average inventory growth at Toyota, Nissan and Honda has run at 56 per cent.

Toyota, Nissan and the other Japanese auto giants have already sharply downgraded their forecasts for the full year – as a whole, the industry appears to be expecting some of the lowest annual sales volumes for several decades by the time the financial year ends in March next year.

The dismal assessment of domestic sales by the Japan Automobile Dealers’ Association, and anecdotal evidence from the massively overwhelmed job placement agencies in Toyota’s heartland of Nagoya, fuelled a growing mood of panic in political circles.

Many thousands of Brazilian immigrants have flocked to the Nagoya area to work in the hundreds of factories supplying parts to Toyota – there are similar patterns around the largest plants of Honda and Nissan.

Those regions are now in increasing chaos, as entire communities confront a sudden shortage of jobs and debate whether to stay in Japan or abandon their mortgages and head back to Brazil.

Tens of thousands of other jobs are being lost across Japanese industry and falling car sales are a sure sign that the financial crisis has already gouged a massive hole in the real economy.

Throughout the Japanese economy, it is the temporary workers – a vast army of young people hired within the last five years on very short contracts – that have been hit in the first wave of layoffs.

Unfortunately for the wider health of retail, it was these younger Japanese, many of whom still lived with their parents, whose discretionary spending had been such a strong force in the economy.

The collapse in car sales, and the eerie silence reported at car dealerships across the country, comes in spite of a recently announced Y5 trillion (£30 billion) government package aimed at boosting consumer sentiment.

Stock markets are now bracing for a series of shocks over the next few weeks as general retailers and consumer electronics stores offer up their assessments of the trading environment in November.

In an increasingly desperate effort to arrest an outright collapse of spending, the Bank of Japan is expected to call an emergency meeting within the next couple of days.

Insiders at the central bank say that it is considering substantially easing the terms for commercial banks to raise capital so they can continue lending to corporations.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive