The Japanese government yesterday took a big step aimed at easing anxiety about the stability of its banks, agreeing to invest Y1,800 billion (£10 billion) of public funds in them. The money will be provided to 21 of Japan's biggest banks in an effort to shore up their capital before the end of their financial year on March 31st.

The ministry of finance hopes the additional capital will also permit the banks to loosen their credit criteria, helping to combat the recession. New data show that during the three months to December, Japan's economy contracted 0.2 per cent quarter on quarter. The Economic Planning Agency admitted that the economy would undershoot its target of 0.1 per cent growth in the year ending March 31st. This is likely to be the first year since 1974 that Japan's gross domestic product has contracted.