Tokyo  - Japan's economy shrank at an annualized rate of 0.4 per cent in real terms in the July-September period, the government said Monday.

The gross domestic product (GDP) fell 0.1 per cent during the three months from the previous quarter, marking the second quarterly drop, the Cabinet Office said.

Looking at the GDP for the July-September quarter, Japanese Economic and Fiscal Policy Minister Kaoru Yosano said Monday that the nation's economy is in a recession.

"As the global economy is expected to slow down for the time being, downward movement (in Japan) is expected to continue," Yosano added.

He expressed concerns over a possible squeeze on the Japanese economy if the financial crisis escalates in the United States and Europe and stock and currency markets continue to fluctuate.

The government's report showed that corporate capital spending fell a real 1.7 per cent in the July-September quarter compared to the previous quarter.

Exports inched up 0.7 per cent, and imports were also up 1.9 per cent.

Consumer spending, which accounts for more than half of Japan's GDP, rose 0.3 per cent due to rising food and oil prices.

GDP is the total value of goods and service produced domestically. Real GDP figures are adjusted for price and seasonal variations. (dpa)