Japan's economy shrank at its fastest pace in nearly 35 years in the fourth quarter of 2008, joining other major advanced economies in sliding further into recession.

Japan, which is largely driven by exports, suffered a loss of 12.7 percent in its gross domestic product (GDP) in the October-December period last year, a government report said Monday, blaming the worsening situation on plunging external demand, rapid deceleration of the world economy and a stronger yen.

Earlier in October, Japanese Prime Minister Taro Aso had unveiled a 27 trillion yen (US$275 billion) stimulus package to bolster the world's second largest economy.

In December, Japan's central bank cut its key interest rate to 0.1 percent, lowering borrowing rates to nearly zero, and adopted new measures to pour more money into the banking system to shake off a widening credit crunch.

These moves in some way helped promote internal demand, but were not enough to instantly pull the export-driven economy out of recession as international demand for made-in-Japan continues to shrink amid the spiraling global economic crisis.

However, Japan is only part of a gloomy global picture. Recent data indicates that the major advanced economies of the world are slipping further into recession despite governments' efforts to stimulate growth.

In the United States, the economy plummeted at an annualized rate of 3.8 percent in the fourth quarter of 2008, the worst since 1982, the US Commerce Department said.

According to the country's Institute for Supply Management, economic activity in the US manufacturing sector failed to grow in January for the 12th consecutive month.

Meanwhile, consumer spending, which accounts for two-thirds of overall US economic activity, recorded an unprecedented six-monthly decline last December, indicating that the economy has yet to hit bottom.

The government's newly passed US$787 billion stimulus plan, which US President Barack Obama described as a "major milestone on our road to recovery," is yet to be tested for effectiveness, and presidential aides have warned consumers not to expect instant miracles.