Japan will remain desperately dependent on exports for the foreseeable future.
Consumer spending fell 0.3 percent in the fourth quarter. The decline reduced economic growth by 0.2 percentage point.
Spending has faltered as companies hire more part-time workers, who typically earn less and receive fewer benefits. Wages have fallen for 43 of the past 46 months, and the full-time labor force contracted for the seventh straight year in 2004.
Government officials including Finance Minister Sadakazu Tanigaki and Economic and Fiscal Policy Minister Heizo Takenaka said yesterday's report hadn't changed their view that Japan's economy was recovering.
Tanigaki said the contraction won't change plans for spending cuts and tax increases to curb the world's largest public debt. Some economists say those plans might further crimp the consumer spending that accounts for half the economy.