The Bank of Japan announced more monetary easing after its monetary policy meeting on Tuesday. The BoJ kept interest rates unchanged at between zero and 0.1 percent but said it would expand its asset-purchase programme by 11 trillion yen to 91 trillion yen.
The additional stimulus come as the economic growth forecast for the fiscal year to March was revised down to 1.5 percent, well down from an earlier 2.2 percent estimate. Prices are also forecast to fall 0.1 percent in the year to March instead of rise 0.2 percent.
The forecast downgrades also comes as a report on Tuesday showed that Japanese factory production fell 4.1 percent in September, while a survey of manufacturers showed that production was expected to decline by another 1.5 percent in October before rising 1.6 percent in November.
Corroborating evidence for the weakness in manufacturing came today from the manufacturing PMI, which fell to 46.9 in October, an 18-month low, from 48.0 in September.
The euro area was also hit by negative economic data on Tuesday.
The European Commission's economic sentiment indicator for the euro area fell to 84.5 in October from 85.2 in September.
Spain's economy contracted 0.3 percent in the third quarter.
The number of Germans out of a job rose by 20,000 in October, although the unemployment rate held steady at 6.9 percent.
Not for the first time recently, the US proved the exception to the negativity. A report on Tuesday showed that US home prices rose 2.0 percent in August from a year ago, the biggest gain since July 2010, according to the S&P/Case-Shiller index.
Still, there was not much cheer in the US on Tuesday after the devastation wreaked by Hurricane Sandy along the east coast.