Nov. 21 (Bloomberg) -- The Japanese government cut its evaluation of the economy for a second straight month amid mounting signs the recession may deepen.

``The economy has weakened further,'' the Cabinet Office said in a monthly report in Tokyo today. ``Amid a further slowdown in the global economy, the downward pressure on the Japanese economy is increasing rapidly.''

The world's second-largest economy contracted for a second consecutive quarter in the three months ended Sept. 30, a report showed this week, confirming Japan's first recession since 2001. Exports, the main engine of economic growth, declined at the fastest pace in almost seven years in October, worsening the outlook for growth.

``Attention should be given to the risks that the economy, including the employment situation, may become severe due to the worsening global financial crisis,'' the Cabinet Office said.

Japan will probably shrink this year and next in the first back-to-back contractions since the onset of the banking crisis a decade ago, according to a Bloomberg survey of economists.

``Japan can't escape the global slowdown,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo today. ``Downside risks are rapidly increasing as the global economy slows further.''

Six Downgrades

The last time the government became more pessimistic about the economy for two straight months was in February and March. The government has downgraded its assessment six times this year, the most since 2001.

Companies are struggling as export prospects worsen. Toyota Motor Corp., world's second biggest carmaker, said today it will cut 3,000 contract workers, following announcements yesterday by Isuzu Motors Ltd. and Mazda Motor Corp.

Consumer sentiment dropped to the lowest on record in October and household spending fell for a seventh month in September. Prime Minister Taro Aso is trying to encourage consumers to loosen their purse strings by pledging to give households at least 12,000 yen ($127) of financial assistance.

The government downgraded its assessment of exports for a second consecutive month and cut its evaluation of the global economy for a third straight month, the report showed.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

Last Updated: November 21, 2008 04:30 EST