Japan's economy shrank at an annualized rate of 3.7 percent in the first three months of the year, bringing back the country into the jaws of recession as a tsunami and earthquake caused declines in factory production and consumer spending in March.

But the economy minister of Japan is hopeful that the economy will grow for the fiscal year on the back of reconstruction demand, Wall Street Journal reported. I expect GDP to grow close to 1% in the current fiscal year, Economic and Fiscal Policy Minister Kaoru Yosano said after the release of gross domestic product data.

As per the figures released by the Cabinet Office, Japan's real gross domestic product (GDP) for the January-March quarter shrank 0.9% from the previous quarter, which means that the annualised rate of contraction is 3.7 percent.

Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said although the latest GDP report is based on the first 20 days following the disaster, the impact is huge. There is no that recession is back, but what is more surprising is how quickly the economy fell, Schulz added.

The most worrying part of the latest GDP report was the decline in private consumption rate, which accounts for almost 60 percent of the Japanese economy. As people cut their spending after the quake, the private consumption rate declined 0.6 percent in the first quarter.

In addition, Japan's trade surplus fell by 34.3 percent in March compared with the same period last year. The 9-magnitude earthquake and tsunami devastated exports, while the costs of imports increased because of high commodity prices.