Japan, the world's third largest economy, contracted sharply in the first three months of the year, after a tsunami and earthquake caused devastation in March.

Gross domestic product (GDP) shrank 3.7% between January and March from the same period the year before, the Cabinet office said.

The country is now in recession, after two consecutive quarters of decline.

Analysts say consumption and exports were worst hit.

"Japan's economy is expected to remain weak for the time being," said Japanese Economics Minister Kaoru Yosano on Thursday.

The contraction was bigger than expected with most forecasts at around 2%.

The data showed that the economy shrank 0.9% from the previous three months, when most analysts had expected a decline of 0.5%.

However, Mr Yosano said that supply constraints are easing and reconstruction demand will likely spur growth.

"The economy has the strength to bounce back," Mr Yosano said.

Pessimistic consumers
 
Nonetheless, private consumption, which accounts for almost 60% of the Japanese economy, declined as well falling about 0.6% as people cut their spending after the quake.

"It was already soft in the final quarter of 2010," said Naomi Fink, Japan Strategist at Jefferies.

The earthquake, however, has further dampened sentiment.

The consumer confidence index fell to 33.1 in April, according to the Cabinet Office.

A reading below 50 suggests consumer pessimism.

"Judging by the drop in retail sales and household expenditures over March, consumption should be one of the greater contributors to negative growth in the first quarter," said Ms Fink.
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