Despite the fact that Japan was not at the heart of the crisis that rocked the world's banks last autumn, evidence is mounting that its export-led economy will be one of the worst effected.

Data published today by the Japanese government shows that exports plunged a stunning 45.7% in January versus a year ago. It was confirmation, if needed, that Japan's export oriented manufacturing engine is stuttering once again. Japan's trade deficit hit 952.6bn yen (close to USD10bn) in January, the largest since records began.

Japan's finance ministry said that exports in January to the US were off 53% on last year and to the EU they were off 47%. And exports to other Asian countries, including China, are shrinking at a similar rate.

Exports of manufactured goods, including cars and consumer electronics, are at the centre of the export decline. Japanese car exports were 69% down in January.

While Japanese companies are among the world's most international in terms of global manufacturing footprints - car companies have long been pioneers in setting up overseas 'transplants' that hedge against currency fluctuations - they still ship plenty from Japan. The weak yen has even encouraged them to retain more capacity at home over the past decade.

Overseas demand for Japanese-made products fell sharply in the final quarter of 2008 and that has fed quickly into reduced national output. Preliminary GDP data for the final quarter of last year suggests that the economy shrank at an annualised rate of 12.7% (yes, a contraction of 12.7%).

Some commentators are already saying that the speed and scale of this slump in Japan suggests that it could be at least comparable with the 'lost decade' adjustment that followed the bursting of Japan's 'bubble economy' in 1990.

This year Toyota, a towering symbol of Japan's post-war corporate strength, expects to make its first ever operating loss. That tells even the casual observer something pretty significant: corporate Japan is already reeling.

A worrying trend is that financially stressed Japanese manufacturing companies who have been cutting output and reducing inventories, are now starting to take the axe to capital spending. That could have adverse consequences for long-term corporate growth.

The Japanese Government has acknowledged that Japan's economy is in its most serious crisis since World War II and is responding with a big stimulus plan. Interest rates are almost at zero. And Japan's terms of trade have been massively helped by recent falls in energy prices. Household debt is nothing like on the scale of the Anglo-Saxon economies. It could actually be worse.

But there are worries that Japan's domestic political disarray could cause further problems this year. The government lacks authority and is divided.

No wonder Shoichi Nakagawa, until recently Japan's finance minister, appeared to be a little 'stressed' at a G20 press conference earlier this month.

Dave Leggett