Japanese car sales have plummeted at a pace not seen since the bleak economic days of the early 1970s. Confirming fears that Japan has crashed into its sharpest downturn since the Second World War, November sales of cars, lorries and buses plunged by 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 figures follow equally grim numbers released before the weekend showing that Japanese global car exports had fallen by more than 4 per cent in October.

The figures show there was, as expected, a sharp decline in sales to the United States and Europe, but the leading Japanese manufacturers were 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 had forecast. Even before the export drop was made official, the companies were well aware of huge stocks of unsold vehicles accumulating around the world.

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

The dismal assessment of domestic sales by the Japan Automobile Dealers' Association, and anecdotal evidence from 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 Toyota; there are similar patterns around the largest plants of Honda and Nissan. Those regions are now in increasing chaos, as entire communities 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 huge hole in the real economy.

Throughout Japan it is the temporary workers - a vast army of young people hired within the past 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 eerie silence reported at car dealerships across the country comes despite a recently announced fivetrillion yen (£30 billion) government package aimed at boosting sentiment.

Stock markets are braced for a series of shocks over the next few weeks as general retailers and consumer electronics stores offer their assessments of the trading environment last month.

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 that they can continue lending to corporations.

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