First quarter business sentiment in Japan plunged, the central bank said on Wednesday.
The Bank of Japan's Tankan survey of business views for January to March was the first drop to negative in seven years.
It follows the biggest GDP contraction in more than five years in the fourth quarter (October-December) sparked by a hike in the sales tax on 1 October last year that hit consumer spending.
The survey did not capture the impact of the delay of the 2020 Tokyo summer Olympics now planned in 2021.
The next two-day Bank of Japan monetary policy review is on April 27-28.
The central bank already has negative interest rates, a measure designed to discourage commercial banks form buying short-term government securities and instead lend money to companies and consumers.