TOKYO (AP) -- Japan's industrial production fell for the fifth straight month in February, but the bad news will only get worse this week for the world's second-largest economy when a key survey of business sentiment is expected to fall to its lowest level ever.
Factory output tumbled 9.4 percent from a month earlier, with especially steep cutbacks among makers of motor vehicles and general machinery, the government said Monday. The figure was in line with market expectations and follows January's record 10.2 percent plunge.
Japan, which had relied on foreign sales of its cars and gadgets to drive economic growth, now finds itself mired in its deepest recession since the end of World War II as consumers and companies around the world slash spending. Data last week showed that the gloom nearly halved exports in February.
The government will release unemployment and household spending data on Tuesday. The Bank of Japan will follow Wednesday with the results of the closely watched "tankan" quarterly business survey. The report, which polls 10,000 companies, is expected to show business confidence at an all-time low.
"While the anticipated pace of deterioration and the level of the (tankan's main diffusion index) are breathtaking, these dramatic numbers are no longer surprising after the incredible fall in major economic indicators, including GDP" in the fourth quarter, said Masamichi Adachi, senior economist at JP Morgan in Tokyo.
Japan's gross domestic product shrank by an alarming 12.1 percent annual rate in the October-December quarter. The contraction is the severest for Japan since the oil shock of 1974 and is double the pace of the decline in the U.S.
There were some hopeful signs amid the gloom.
The Ministry of Economy, Trade and Industry predicts industrial production will rise 2.9 percent this month and climb 3.1 percent in April as the country's factories begin to stir.
In response to the unprecedented collapse in global demand, major exporters including Toyota Motor Corp. and Sony Corp. have moved quickly to adjust, reducing shifts, suspending factory lines and slashing thousands of workers.
Their aggressive moves have suppressed inventory levels, which dropped 4.2 percent in February in the second straight month of decline, the ministry said. Manufacturers' shipments fell 6.8 percent.
"The auto industry is leading the way in reducing cutbacks as inventories fall below optimum level due to high-speed inventory corrections," said Goldman Sachs economist Chiwoong Lee in Tokyo. "Production should stabilize at low levels and might even post a small increase for April-June."
Indeed, Nissan Motor Co. said last month that its inventory levels have dropped low enough to ease domestic production cuts in March, though spokeswoman Pauline Kee declined to provide specific output goals.
Along with slimmer stockpiles, Japanese exporters are also beginning to see slivers of hope in the U.S. and China -- their two biggest markets and the keys to an economic recovery.
U.S. home sales and demand for durable goods rose in February, while Wall Street has staged a strong rally over the last few weeks on optimism over a government plan to rid banks of souring debts. Japanese stocks followed suit, with the benchmark Nikkei 225 stock average up 20 percent between a 26-year-low on March 10 and Friday.
But trading turned bearish Monday as the Nikkei tumbled 4.5 percent amid concerns about the fate of the U.S. auto industry.
In China, overall economic growth slowed to 6.8 percent in the fourth quarter from 2007's stunning 13 percent rise.
But a 4 trillion yuan ($586 billion) stimulus planned by Beijing is expected to provide a boost to major companies with public works spending. The country's central bank governor also said in a recent essay that the country's growth decline appears to be slowing.
Japanese officials plan to unveil new stimulus measures of their own ahead of the G-20 summit in London later this week, on top of about 12 trillion yen ($122 billion) in public spending announced last year.
Finance Minister Kaoru Yosano has suggested that the government may need to spend up to 20 trillion yen in a new package to wrest the economy out of a painful recession.