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TOKYO, May 20 (Reuters) - Japan's economy shrank 4.0 percent in the first quarter, the biggest contraction on record, but economists see a return to modest growth in coming quarters for the world's No.2 economy.
The fall in gross domestic product (GDP) was smaller than the 4.2 percent drop expected by economists and followed a revised 3.8 percent contraction in the last quarter of 2008 as a plunge in global demand drove Japan's export-driven economy further into recession.
The January-March slide, an annualised rate of minus 15.2 percent, marked a record fourth consecutive quarter of contraction.
Japan's heavy dependence on export industries for growth has pushed it deeper into recession than other big economies in the wake of the global financial crisis.
The euro zone economy shrank 2.5 percent in January-March, the worst performance since the advent of the common currency bloc, while the United States contracted an annualised 6.1 percent.
Rebounds in exports and industrial output have raised hope that the economy may see some growth in the next two quarters, but analysts expect any recovery to be fragile as many companies have slashed jobs and capital spending, hitting domestic demand. (Reporting by Tetsushi Kajimoto, Hideyuki Sano, Stanley White and Chisa Fujioka; Editing by Hugh Lawson)