Reuters reports that Japan's likely decision to declare a state of emergency in the Tokyo area will most probably trigger a contraction in January-March, analysts say, adding to the headache for policymakers struggling to cushion the blow to the economy from the pandemic.

The world's third-largest economy rebounded sharply in the third quarter last year from a record April-June slump caused by the pandemic, heightening expectations of a moderate recovery.

But such hopes have been dashed by a resurgence in COVID-19 infections that have forced the government to consider imposing a state of emergency that could last about a month.

BNP Paribas chief Japan economist Ryutaro Kono said he plans to slash his January-March forecast to an annualised contraction of around 2% from the current projection of a 0.2% increase.

Daiwa Institute of Research also expects the economy to shrink in January-March, even though it sees the hit to real gross domestic product (GDP) at less than 1 trillion yen ($9.7 billion) per month - one-third that from last year's curbs.