The country's financial plight was compounded by the revelation that its 17 biggest banks were sitting on a $426bn pile of bad loans - a much higher figure than expected.
The Japanese government announced that the country's jobless rate hit 4.4 per cent in November, its highest since 1953, as the stagnating economy continued to take its toll on the labour market. The authorities said it was the first time ever that Japanese unemployment has equalled the US figure.
Experts said the record had little economic significance but was a humiliating defeat for a country once famous for its "jobs-for-life" culture. "I think a meltdown in the lifetime employment system is going to start," said Economic Planning Agency minister Taichi Sakaiya.
The economic gloom had little impact on the Nikkei index, which ended a three-day losing streak on Christmas day. The index closed up 91.22 points to 13,797.95 after Kiichi Miyazawa, the finance minister, said the government would not sell its holding of government bonds. The news prompted a fall in bond yields and sparked a rally among financial stocks.
Worries about the health of Japanese banks had led to a 0.53 per cent tumble in the Nikkei on Christmas Eve. Standard & Poor's decision to downgrade seven Japanese banks also hit bank shares, which fell 2 per cent. Most other stock markets were closed for Christmas Day. On Christmas Eve, the Dow Jones had closed up 15.96 at 9,217.99.Reuse content