Japan's Dismal Economic Outlook Causing Jitters Across Asia བོད་སྐད།

A raft of dismal economic data is sending Japan, the world's second largest economy, further into recession. The gloom has regional partners increasingly worried. There is concern in Australia, where Japan is a key trading partner.

Japan's bleak economic outlook has sent shares on the Nikkei index falling by more than 3 percent, caused by a Thursday decline on Wall Street, weak economic data and pessimistic forecasts of corporate earnings.

Early official estimates have said that industrial production in Japan dipped by a record 9.6 percent in December, and January's performance is likely to be just as bad.

Japanese unemployment suffered its biggest jump in 40 years while household spending was down for a tenth month in a row.

The gloomy news in Japan seems relentless.

Car maker trouble

The country's second-biggest car maker, Honda, has been forced to slash its annual profit forecast by more than half because of rising costs, a stronger yen and falling sales. Reports in Tokyo have said that motor giant Toyota is also in financial trouble and expects to record a loss in the current fiscal year.

The rapid worsening of the Japanese economy and in particular its manufacturing sector is bad for Australia's once mighty minerals and energy producers, which are facing falling prices and demand.

Japanese economy now affecting Australia

Japan bought $22 billion worth of Australian goods last year, and is the country's main export customer.

The global slowdown has begun to bite on the Australian economy, and the government is considering a second multi-billion package to stimulate domestic demand.

Heather Ridout from the Australian Industry Group is calling on accelerated tax cuts for low income earners, despite reservations at the International Monetary Fund.

"We're calling for tax cuts to be brought forward, which are already scheduled, for the low payed," Ridout said. "The low payed are those that spend it. The issue with the IMF's view is that if you give tax cuts to the whole income cohort, that is, to high payed as well as low payed, often the higher payed people save it."

Asian stock markets remain nervous amid so much gloom. South Korea's Kospi index lost ground along with markets in Singapore and Malaysia.

Australian shares were up slightly.

Hong Kong's Hang Seng was boosted by speculation that China will cut interest rates over the weekend and posted a modest rise of just under 1 percent.

Markets in mainland China are closed all week for the Lunar New Year.