Japan’s economy is likely to contract in the year ending March 2010, according to the governor of the Bank of Japan Masaaki Shirakawa, who revealed in an interview that the bank was poised next month to reverse its forecast of a mild recovery.

His forecast that “the economy for fiscal 2009 may turn negative” – a downgrade from the central bank’s current estimate of 0.6 per cent growth – underscores widespread pessimism about the prospects for a quick recovery of the world’s second-largest economy.