Japan and Germany said on Thursday they would spend billions of dollars to provide a cushion against a deep recession, while U.S. data showed the world's largest economy shrank in the third quarter as the financial crisis raged.
The U.S. economy shrank at a 0.3 percent annual rate in the third quarter. While the data was not as bad as economists had expected, it was still the sharpest contraction in the United States in seven years as consumers cut spending and businesses reduced investment in the face of rising fears that recession was setting in.
Japan, the world's second biggest economy, unveiled a 5 trillion yen ($51 billion) package of spending measures to support its economy and Germany planned a range of steps worth up to 25 billion euros ($32 billion) to boost business.
"A harsh storm seen only once in 100 years is raging," Japanese Prime Minister Taro Aso told a news conference. "Under such circumstances, I am certain that what is most important is to remove uncertainties from the lives of people.
A leading member of Germany's ruling Social Democrats (SPD) told a newspaper that the government planned to introduce a range of steps to bolster the economy next week.
The measures would complement a series of interest rates cuts, including the latest round of global monetary easing from China, Norway and the United States on Wednesday.
Japan may cut rates on Friday and the European Central Bank, Britain and Australia are expected to follow next week.
"All together we are talking about a volume of perhaps 20 billion euros to 25 billion euros," Peter Struck, parliamentary floor leader of the SPD, which shares power with Chancellor Angela Merkel's conservatives, told the Berliner Zeitung.
The package will include support for car makers and building renovation as well as tax breaks enabling companies to write off a share of their investments, German newspapers reported.
There was encouraging news from the banking sector. Closely watched rates on bank-to-bank borrowing fell on Thursday, helped by the U.S. Federal Reserve's rate cut on Wednesday and also currency swap lines to ease dollar funding tightness around the world.