The Japanese economy contracted by 0.6% between April and June, prompting fears that it is sliding towards recession.
Declining exports and consumer demand were behind the fall - the first for more than a year - which came after a rise of 0.8% in the previous quarter.
With consumer confidence at record lows, private consumption, which accounts for half of GDP, fell by 0.5%.
Some economists believe the economy will contract in the next three months, partly due to the slowdown in the United States.
An economy is considered to be officially in recession after two consecutive quarters of negative growth.
GDP, the total value of goods and services in the economy, shrank by 2.4% between April and June, compared with the same period in 2007. That is a significant change from the first quarter between January and March, when the economy grew by 4% compared with a year earlier.
Figures issued last month showed consumer confidence in Japan at its lowest level for 26 years in the quarter to June.
