The bare statistics published yesterday about the world's second-largest economy make grim reading. Not only did Japanese gross domestic product shrink in the three months to December, it also declined - according to revised figures - in the previous two quarters. Three consecutive quarters of negative growth are more than enough to count as a recession. On the face of it, Japan's recovery of the past three years has come to a juddering halt.

Japan's real situation is not quite as bad as it seems. The recession is exceptionally shallow, and appears to be getting shallower: the quarter-on-quarter fall in GDP in the latest three months was only 0.1 per cent, compared with 0.3 per cent in the September quarter and 0.2 per cent in the three months to June. During the 2004 calendar year, the economy actually grew 2.6 per cent, its fastest for eight years.