Japan economy contracts 1.4% in Q 4
People walk along a highway tunnel in central Tokyo, Japan, February 15, 2016. Japan's economy shrank more than expected in the final quarter of last year as consumer spending and exports slumped, adding to headaches for policymakers already wary of damage the financial market rout could inflict on a fragile recovery. Reuters

Japan's gross domestic product contracted an annualised 1.4 percent in the last three months of 2015 the Cabinet Office said on Monday.

The range of the contraction was higher than analysts' consensus estimates. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.8 percent decline. Reuters had forecast a consensus estimate for a 1.2 percent decline.

The economy had expanded 1.3 percent in the previous quarter.

Private consumption, which makes up 60 percent of GDP, fell 0.8 percent signalling Prime Minister Shinzo Abe's stimulus policies have not done enough to pull the country out of stagflation.

"Consumption was weak, even after taking out seasonal factors, as households tightened their purse strings," Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo, told Bloomberg.

"The downside risks to Japan's economy are likely to increase as the yen's gains may damp capital spending and exports, and private consumption also is looking weak. There's no clear driver to support Japan's economy."

While domestic consumption sagged, exporters were not able to make up for this as a strong yen pulled down exports.

Last month, the Bank of Japan (BoJ) adopted negative interest rates on excess bank deposits with the central bank, dealing shock to financial markets and Japanese domestic savers.

The more than expected contraction in the economy also spurred speculation about further monetary easing.

"It's a matter of time before the BOJ and the government will take additional stimulus measures," Junko Nishioka of Sumitomo Mitsui Banking, according to Reuters.

"Private consumption is especially weak. The economy is at a standstill," she added.