Japan’s industrial output slid by a greater-than-expected 2% during June, adding to fears that the country could be heading into a recession.

The government confirmed that output was softening, having previously said that it was generally flat.

The figures came as the International Monetary Fund (IMF) predicted Japan was heading for an economic slowdown.

But the IMF said the Bank of Japan could afford to hold interest rates steady to see how the economy develops.

“We do see the economy growing to a virtual standstill in the second quarter of the year and rather weak growth in the second half of the year before beginning to recover next year,” said Daniel Citrin from the IMF.

Recession fears

But some analysts see the weak output figures as indicating that the economy will contract, rather than remaining at a standstill.

The data “is quite bad and suggests the the Japanese economy is likely slipping into a recession,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

The government said its survey of manufacturers suggested output would decrease by 0.2% in July and by another 0.6% in August.

The major concerns for Japanese manufacturers are rising commodity prices and the weakening of the economies of some of its main customers.

The sectors that were mainly responsible for June’s slowdown were transport and general machinery.

“Firm demand from overseas economies has been supporting production but as exports weakened in June, we can no longer count on it,” said Mr Minami.

News reported by The BBC