It could take Japan five years to recover from the recent earthquake and tsunami, with reconstruction costing up to £144bn, the World Bank has warned.
"If history is any guide, real GDP growth will be negatively affected through mid-2011," the World Bank said in its latest regional update.
However, it added growth should pick up in subsequent quarters "as reconstruction efforts, which could last five years, accelerate".
Japan's GDP grew 3.9% in 2010, when it was overtaken by China as the world's second-biggest economy, but it has suffered debt and deflation problems since the early 1990s.
On Friday, the G7 nations vowed to intervene in currency markets to stem the yen's rise and support Japan's economy.
As Japanese financial markets remained closed for the spring equinox holiday on Monday, analysts warned the nation would also lose a hefty slice of tourism revenue.
The annual cherry blossom festival season is usually a big draw for visitors, but this year many have chosen to stay away.
Japan's car and electronics industries are also feeling the impact of the disaster, with production at major companies including Toyota and Sony disrupted.
In the electronics sector, prices of memory chips - a major export - have shot up by more than 20% in some segments, the World Bank said.
Meanwhile, companies globally have warned of the impact of the quake on one of their trading partners.
Jeweller Tiffany & Co was the latest to lower its profit forecast after it had to close some of its 56 stores in Japan.