More jobs and more money could disappear from Australia's economy as Japan sinks into recession.
The world's second largest market has seen a drop in growth for the last two quarters, meaning companies have been slashing investments and cutting staff.
Finance reporter Ross Greenwood has told 2GB's Philip Clark Japan's plunge is going to have a direct impact on what we do here, because they are one of our biggest traders.
"It is the world's second largest economy, but more important, it's our largest trading partner.
"It basically accounts, last year, for 19 per cent of Australian exports.
"It's vital for Australia that it keeps going and finds some way to keep on growing.
"BHP said it had customers deferring orders of iron ore. That plays straight back into the amount of money that comes into this country to support jobs and support taxes."
The Australian share market has closed down two and a half per cent as investors remain concerned about the continuing gloomy economic outlook.
The benchmark S&P/ASX200 index was down 2.54 per cent at 3653, while the broader All Ordinaries index lost 2.32 per cent to 3639.5.
On the Sydney Futures Exchange at 1615 AEDT the December share price index futures contract was 62 points lower at 3695 on a volume of 28,232 contracts.
The Australian dollar also closed down, buying 64.49 US cents.