GRIM figures showing Japan sliding into a renewed recession at the end of last year startled global markets yesterday.

In worse than expected data, the Japanese authorities said the world’s second-largest economy shrank in the final quarter of last year by 0.1 per cent.

With further revisions to earlier figures showing that GDP also shrank by 0.3 per cent in the third quarter, and by 0.2 per cent in the second, the news left Japan once more mired in technical recession.

However, the data provoked confusion in markets in Tokyo and around the world, seemingly eliminating Japan’s economic recovery at a stroke.

Economists challenged the accuracy of the numbers, while the Tokyo stock market closed barely lower as investors brushed aside the GDP figures as implausibly gloomy.

Analysts doubt some of the inputs used in compiling Japan’s national accounts, which are viewed by many as the least reliable among those from the world’s key economies.

One economist in Japan said that yesterday’s bleak results were the consequence of “garbage in, garbage out”.

The official data show that, as Heizo Takenaka, Japan’s Economy Minister, put it, its economy has “been marking time for a somewhat prolonged period”.

In the final three months of last year, the data show that consumer spending and government investment fell by 0.3 per cent, hitting growth, while weak exports also saw Japan’s overseas trade subtracting from growth for a second quarter in a row as sales abroad were outstripped by imports.

But analysts said that the dire picture painted by the statistics looked odd.

“This is very hard to square with the more positive message from the sentiment surveys,” said Julian Jessop, of Capital Economics in London. “If Japan was indeed in recession for most of last year, we would have expected this to be reflected in a sharp fall in consumer and business confidence.”

Many economists expect that future revisions to the data will eliminate yesterday’s reported technical recession. “Do not be surprised if this technical recession disappears,” Paul Sheard, of Lehman Brothers, said. “Instead of splitting hairs on a decimal place we should be concentrating on this question: is the economy growing into a pattern of sustainable growth or not?”

Another key issue in yesterday’s data is the extent of deflation in Japan.

The official figures show prices are now falling less sharply. If this is correct, it means that a given expansion in the size of the economy translates into lower growth in real terms, after adjusting for falling prices, than it would have previously.

But there are questions over the accuracy of these measurements.

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