Japan's economy slumps as global gloom spreads

Falling demand forced German car maker BMW to announce it was shedding 850 jobs and cutting back production of the Mini at its factory near Oxford.

European Central Bank President Jean-Claude Trichet warned policymakers they must avoid sowing the seeds of future crises in their efforts to revive economies.

Decisions made today should "not lay the ground for similar disorder in the future," he told European parliamentarians.

In India, the government said spending may have to rise sharply this year to shield the economy from the global credit crunch. The announcement in an interim budget worried investors, and credit rating agency Standard & Poor's said it planned to review the country's domestic debt rating.

Singapore Airlines said it planned to cut capacity by 11 percent in the year from April amid waning travel and cargo demand.

The German government is considering emergency measures to rescue the stricken bank Hypo Real Estate, whose shares have fallen by 97 percent over the last 18 months.

In Europe, the Czech Republic approved an economic stimulus package, Hungary announced plans to reform its tax code to help boost the economy, and Bulgaria said its economic growth nearly halved in last year's fourth quarter.

The widening economic crisis in Russia has sparked a wave of violent crime in Moscow that started last month, said the city's chief prosecutor.

GLOBAL CRISIS

Even though Japan has been relatively insulated from the collapse of the U.S. credit and housing markets that precipitated the global downturn, Economics Minister Kaoru Yosano said his country faced its worst economic crisis since World War Two.

With demand for its cars and electronics waning, an unprecedented slump in exports saw Japan's economy shrink by 3.3 percent in the fourth quarter of 2008, or an annual rate of 12.7 percent, marking three straight quarters of contraction and its worst result since the first oil crisis in 1974.

Japanese investors had largely factored in a big fall in GDP, limiting losses after the data was released.

The Nikkei share average fell 0.4 percent. But the yen rose against other major currencies after the G7 financial chiefs made no specific mention of the strength of the Japanese currency.

Adding to the Japanese government's woes, Finance Minister Shoichi Nakagawa faced calls for his resignation after denying he was drunk at a G7 news conference. He said he had taken too much cough medicine.

In the United States, administration officials said President Obama would form a task force to oversee the restructuring of the ailing U.S. auto industry.

General Motors Corp and Chrysler LLC are due to submit new turnaround plans by Tuesday showing they can be made viable again after receiving $13.4 billion in emergency aid last year.