Tokyo saw a 0.1 percent contraction in October-December from the previous three months, underlining the work ahead for Shinzo Abe’s new government as it tries to boost growth while fending off claims it is manipulating the yen to lift exports.

Financial turmoil in key market Europe, a strong yen and a diplomatic row with China have hurt Japan, frustrating hopes that it would cement a recovery from the 2011 quake-tsunami disaster that battered domestic demand and output.

The country logged modest growth of 1.9 percent for 2012 over the previous year.

Japan has seen a mixed bag of economic data lately as factory output rises while the export picture remains cloudy, with a record trade deficit for 2012.

However, the yen has weakened in recent months, which helps exporters’ competitiveness and provided a much-needed boost to their latest earnings results.