Japan expects slump in economy

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Japan says it expects its economy to shrink by 3.3% over the coming year - the country's worst slump in at least half a century.

The news comes as the government prepares to present a 15.4 trillion yen ($159bn; £109bn) economic stimulus plan to parliament.

The projected downturn for the 2009 fiscal year would be the worst since Tokyo began measuring growth in 1955.

It follows an estimated decline of 3.1% in 2008, the government said.

Finance Minister Kaoru Yosano said the world's second biggest economy remained vulnerable to fresh turmoil overseas.

"Exports have plunged much harder than our expectation," he said.

Government estimates of the decline have been revised radically downward, in what officials described as quickly changing conditions.

"The global economic crisis and economic downturn is increasing in severity, and Japan's export market is rapidly shrinking," the Cabinet Office said in a statement.

Opposition victory

The Nagoya victory is a boost for the opposition Democratic Party

The government says its planned stimulus spending plan should boost economic output by 2% this fiscal year.

It will issue a record 10.8 trillion yen in bonds to cover the extra spending, adding to debt pressures.

However, some investors hope the slump in exports may have reached its low and can only improve.

Analysts said figures due to be released this week may show that factory output in Japan picked up for the first time in six months in March.

As newspaper polls suggest the government is gaining popularity in its efforts to cope with the financial crisis, Prime Minister Taro Aso is reported to be considering when he might call national elections.

The opposition Democratic Party has suffered from a funding scandal involving an aide to leader Ichiro Osawa.

But the party won a key by-election at the weekend, when Takashi Kawamura was elected to the the post of mayor of the central city of Nagoya.

Mr Yosano told reporters that the climate was not right for a poll.

"The economic difficulties that people face are too severe so this is no time to hold an election," he said.