TOKYO, JAPAN - JAPAN'S economy shrank 0.1 per cent in the third quarter, sending the world's second-biggest economy into recession and lagging market expectations for anaemic growth of 0.1 per cent.

The contraction confirmed that the global financial crisis has sabotaged growth in yet another major economy, with the euro zone already in recession, using the most common definition of two consecutive quarters of contraction.

Japan's gross domestic product figure translated into an annualised fall of 0.4 per cent, lagging a consensus market forecast for a 0.3 per cent expansion, government data showed on Monday.

The euro zone is already in recession, using the most common definition of two straight quarters of contraction, and analysts say much of the developed world will follow.

The quarterly figure translated into an annualised growth of zero percent growth, lagging a consensus market forecast for a 0.3 per cent expansion, government data showed on Monday.

In April-June this year, the Japanese economy shrank a revised 0.9 per cent from the previous quarter.

The financial crisis continues to wreak havoc on the world's major economies.

The 15-nation euro zone economy shrank 0.2 per cent for the second straight quarter and most economists say the United States is probably already in recession, although official data showing that will not come until January.