Tokyo  - Japan's economy shrunk an annualized 12.1 per cent in the final quarter of 2008, according to revised statistics released Thursday by the Japanese government.

Initial figures had projected a 12.7-per-cent contraction for the gross domestic product (GDP.)

Nonetheless, in light of an unprecedented drop in exports, Japan's economy has shrunk the most since the oil crisis 35 years ago.

According to the revised figures, GDP in the third quarter of 2008 shrank only 3.2 per cent instead of the 3.4 per cent initially projected.

The economic decline in the world's second largest economy is the worst since the end of World War II. Economists say the export- dependent country will only recover when demand from its biggest customers in the US and China recovers.

Japan's exports dropped 46.3 per cent in January, and Japan's government suffered its first deficit in 13 years. (dpa)