'The international financial and capital markets have fallen into a crisis that is said to come only once in 100 years, pushing the economy into recession,' he said in a speech at the start of the new parliamentary session.

'The Japanese economy has experienced falling exports and production.

Consumption has also turned stagnant, and the economy is worsening,' he said.

Japan's economy shrank for a second straight quarter in the three months to September, officially entering recession, and the situation has worsened since then with exports and production plunging in November.

Some of Japan's best known manufacturers, including Toyota Motor Corp, Sony Corp and Canon Inc, have lowered production and cut jobs to adjust to the fall in demand for their exports.

Japanese Prime Minister Taro Aso is introducing a 4.79 trillion yen (S$76.2 billion) supplementary budget for the year to March 2009 and a record-high annual budget for the following fiscal year to boost the economy.

'We are confident that we submitted the best plan possible and that the legislation is the best remedy to boost the economy,' Mr Aso told lawmakers from his Liberal Democratic Party (LDP).

However, the Aso government faces tough battles on the legislative floor.

The opposition, which controls the less powerful upper house, is gearing up to block bills from the ruling party and is demanding an early snap election. -- AFP