Japan's prime minister has asked the government to draw up a third economic stimulus package, with financial data indicating that the country is plunging into its worst recession in more than 50 years.

The plan was announced on Tuesday as Taro Aso prepared to travel to a G20 summit in London, which is aimed at tackling the global economic downturn.

"Japan is still facing the economic crisis," Aso said.

"I instructed the government and ruling parties to compile steps to cope with the current economic situation, which will include submission of the extra budget."

Aso did not specify the amount of spending that would be included in the new package, but said it would be unveiled in mid-April.

Japanese media predicted that the latest stimulus would aim to create $612bn worth of demand and two million jobs.

The global slowdown has left few economies unscathed, but Japan, the world's second-largest, has been hit especially hard.

The International Monetary Fund (IMF) says the heavily export-dependent economy will shrink by 5.8 per cent this year, far worse than expected in the US and most European countries.

Unemployment surge

According to the latest figures, unemployment rose to 4.4 per cent, up from January's 4.1 per cent, with the number of jobless surging 12.4 per cent from a year ago to about 330,000.

The number of available new jobs also continued to slide, hitting a six-year low.

"We recognise that the current [employment] situation remains severe," Takeo Kawamura, a government spokesman, said.

"There is a need for additional measures" to create new jobs.

Hiroshi Watanabe, an economist at the Daiwa Research Institute think-tank, said: "The employment data is likely to continue worsening for the  next three to six months."

Other data indicated that household spending, a key measure of individual consumption, tumbled 3.5 per cent in February from a year ago.

Business confidence

The latest figures are among several major indicators being released this week, with the central bank set to release results of the closely watched Tankan quarterly business survey on Wednesday.

The poll of 10,000 companies is expected to indicate a further deterioration of business confidence and record cuts in companies' capital investment plans.

But there was some glimmer of good news on Monday, with the ministry of economy, trade and industry predicting industrial production would rise 2.9 per cent in March and 3.1 per cent in April following February's 9.4 per cent drop from the previous month.

Japan's central bank governor also said in a recent essay that the country's decline in growth appeared to be slowing.