TOKYO, Japan (CNN) -- The extent of the economic malaise that has descended on once-prosperous Japan is evident in the latest economic figures showing the steepest ever fall in the Far Eastern nation's industrial output.
Hidefumi Ito lives in a net room in Japan, a closet-sized space offering him a refuge from homelessness.
Production at the country's factories fell a record 10 percent in January as export partners cut back on orders.
Exports plunged an unprecedented 45.7 percent last month, as major exporters such as Toyota and Nissan announced further production cutbacks.
Falling global demand for Japan's cars and electronics has led to increased unemployment.
The number of people classed as unemployed rose for the third month in a row, by 210,000 to 2.77 million in January.
Economists said a fall in the unemployment rate to 4.1 percent in January from 4.3 percent in December indicated disheartened jobseekers were leaving the market.
"Jobless people are simply giving up looking for new work," said Credit Suisse economist Satoru Ogasawara. "I'm sure this figure doesn't mean employment is improving."
Tent cities housing the jobless, and now homeless, have sprung up in Japanese parks.
The rows of tents offering shelter for the unemployed present a shocking reality to a country where lifetime employment was the rule just a decade ago.
A change in labor laws led to a rise in temporary workers -- they now make up a third of Japan's workforce.
They have few employment rights compared to full-time workers and are now the ones being cast aside as companies brace themselves for a deepening recession.
The more fortunate have found shelter in net rooms in the city; small rooms offered to workers at a daily rate of around $20 for 24 hours. They're the size of closets but have two essential tools for job-hunting: a computer and Internet hook-up.
CNN first met Hidefumi Ito in his net room six months ago. A former art gallery director, Ito lost not only his job and his home, but contact with his three children when his wife walked out on him. Read Kyung Lah's blog on Ito
He's still living in a net room, but has been employed as a custodian by the company who runs them. For eight hours a day, he scrubs toilets and makes beds for a monthly salary of $1,600. Watch Hidefumi Ito's story »
Tsukasa, the company that created the net rooms, says it's running at 100 percent occupancy at all of its buildings. Tsukasa's general manager, Koji Kawamata, says the company is currently building more of the rooms but is struggling to keep up with demand.
There's no sign yet that demand will start to wane. Japan, Asia's largest economy by GDP, also reported the steepest decline in monthly household spending since the country slid into recession last year.
Household spending fell 5.9 percent in January, compared with a year ago, indicating consumers are becoming more reluctant to spend what money they have.
Japan's core inflation figure was steady in January, raising fears that deflation could return less than two years after the last period of falling prices.