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TOKYO : Japan became the latest major economy to sink into recession as markets gave a lukewarm response to an action plan from international leaders to tackle the global financial crisis.
The Group of 20 rich and emerging nations pledged to work together to restore global growth and overhaul the world's financial system, but stopped short of announcing specific measures such as coordinated stimulus spending.
"In the midst of an emergency crisis, to have a statement that reads 'We will cooperate with each another' is all but meaningless," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
The leaders vowed to use government spending to reverse a spreading recession, to press for a global trade deal to ward off protectionism and to reform financial regulation and world financial institutions.
Many market players had been hoping for more specific steps to try to prevent the worst financial crisis in decades pushing the global economy into a long and deep recession.
"The G20 statement made promises of future initiatives on global financial regulation and monetary and fiscal stimulus to help global demand, but there was nothing concrete," noted Barclays Capital analysts.
Asian stock markets were mostly lower. Stocks closed down 2.5 percent in Sydney and 0.9 percent in Seoul, while Hong Kong was 0.4 percent lower in late trade. Tokyo managed to eke out a gain of 0.7 percent.
There was no let up in the flow of bad economic news. Official data showed Japan , the world's second largest economy, contracted 0.1 percent in the third quarter, following Germany and Italy into recession.
US president-elect Barack Obama vowed to make fighting a looming recession a top priority with new stimulus spending and help for the auto industry.
He said there was a common understanding that "we have to do whatever it takes to get this economy moving again."
"And that we shouldn't worry about the deficit next year or even the year after. That short term, the most important thing is that we avoid a deepening recession," he told the CBS television network in an interview.
The yen rose as investors became more risk averse due to the lack of specifics in the G20 action plan.
The dollar fell to 96.91 yen in Tokyo afternoon trade, down from 97.06 in New York late Friday. The euro dropped to 1.2567 dollars from 1.2591 and to 121.77 yen from 122.24.
"The economic spillover of the financial crisis has increased and there is uncertainty about when conditions will stop getting worse," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.
Major companies around the world continued to feel the pain from a financial crisis that began with a wave of defaults on US sub-prime, or risky, mortgages and developed into a full-blown credit crunch and global economic slump.
The parent companies of China Eastern Airlines and China Southern Airlines are expected to each get state aid of three billion yuan (440 million dollars) to tide them over hard times, state media reported Monday.
German Chancellor Angela Merkel was due to hold crisis talks with executives at car maker Opel, which has said it needs state guarantees for its bank loans as its US parent company General Motors struggles to stave off bankruptcy.
But German Finance Minister Peer Steinbrueck ruled out a financial rescue package for the auto sector.
"An economic programme for the entire automobile industry makes no sense," Steinbrueck told the mass-circulation daily Bild, stressing that the state is "not responsible for errors committed by industrialists."
- AFP/vm
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