This is the sort of news that will make it difficult for Japanese policymakers to lift the sales tax as planned next year.
The Cabinet Office's Economy Watchers Survey fell from 47.4 in September to 44.0 last month.
The figure, which is based on surveying 2,000 individuals who are in key positions to observe economic changes, was only anticipated to fall marginally to 47.2.
Moreover, respondents' outlook deteriorated from 48.7 to 46.6. Any score below 50 means pessimists outnumber optimists.
October's score is the lowest since April, suggesting that the economic downturn since April - when Japan raised the sales tax from 5 to 8 per cent, causing consumers to become thrifty - is becoming more prolonged than policymakers had anticipated.
The government is supposed to decide next month to go ahead with a second tax increase in October 2015, but with the economy this gloomy that looks less and less likely.
The economy watchers' survey was published just an hour after the Cabinet Office's consumer confidence survey slipped from 40.5 to 38.9 - also the lowest since April.
However, there's one key reason why one could discount the results of both surveys: each was conducted before the Bank of Japan ramped up its monetary stimulus programme on Oct. 31. If there are signs the stimulus is aiding the economy, the Abe government could be feel more confident to raise taxes.