Figures out Thursday showed GDP falling 0.4% at an annual rate over the October-December quarter.
Analysts had expected a solid increase.
Instead, the number marked the second straight quarter of contraction - the usual definition of recession.
Private consumption - which makes up more than half of all economic activity - was one big negative, falling 0.2%.
But capital spending by firms also fell.
Those factors overwhelmed a solid rise in exports.
Now some economists fear the current quarter could also see a contraction, with negatives including the aftermath of Japan's New Year's Day earthquake.
That all poses a fresh dilemma for the Bank of Japan.
It had been expected to start moving away from negative interest rates in the coming months.
But governor Kazuo Ueda has said he wants to see signs that rising wages are driving consumption before he acts.
Thursday's numbers suggest Ueda may not get the signals he wants to start raising rates.
Some economists predict the central bank may even have to sharply downgrade its GDP forecasts.
Japan's Nikkei stock index rose around 1% after the data, suggesting some traders are betting rates will stay low for longer than previously expected.
