The 29-nation OECD, the Paris-based exclusive club of rich, industrialised economies, said through its Tokyo office the contraction would be the first since 1974 when Japan had its first post-war negative growth because of the first oil crisis.

The OECD also said that Japan's unemployment rate, already high at 4.3 per cent, would rise higher by the end of the current fiscal to March 31.

The causes of the slump are many including the government's ill-advised fiscal belt-tightening measures, huge faults in the country's financial and banking system, and dwindling consumption due to massive fear of an economic collapse generated by official fiscal austerity programme, according to the OECD survey.

The fiscal austerity is coming to an end. The government has already announced two massive spendingprogrammes amounting to several hundred billion dollars to pump fresh cash into the economy.

Prime minister Obuchi on Wednesday indicated that if needed he would throw in more funds to revive the economy.