Economists were expecting the Japanese economy to contract in the last quarter of 2011, but not this badly, reports the BBC. Japan's gross domestic product shrunk 2.3% in the last three months of the year, much worse than the 1.4% economists were predicting, due to the yen rising 7% against the US dollar since April, the effects of last March's earthquake and tsunami, and the general worldwide economic slowdown.
"This is a contraction driven by external demand. Exports have fallen a lot because of a triple shock from Europe, the strong yen, and floods in Thailand," said one analyst. And with the Bank of Japan's interest rates so close to zero, at just 0.1%, experts say there is little room for it to influence the economy. (Read more Japan stories.)