Japan's economy plunged deeper into crisis yesterday as share prices followed Wall Street and tumbled to their lowest level in 15 years.

The Nikkei average dropped below the 12,000-mark for the first time since February 7th, 1985, ending 351.67 points or 2.89 per cent down at 11,819.70 The share nosedive prompted Japan's embattled Prime Minister, Mr Yoshiro Mori, to announce the establishment of an emergency task force to help reverse an 11-month slide in the stock market.

"Given the recent severe economic conditions and stock movements, I want to set up an emergency task force to decisively implement the economic package that has been proposed by the ruling coalition," he said.

The economic package was unveiled by the ruling coalition last Friday and focuses on tax breaks to revitalise the ailing economy.

While the yen shook off some of its losses against the dollar, it stayed in 20-month low territory with Japan viewed as more vulnerable than the US to a slowing world economy given its reliance on exports and perceived lack of leadership.

The Japanese Economics Minister, Mr Taro Aso, yesterday said the government must also consider implementing new steps, including a revision of the tax regime.

"The government has traditionally encouraged people to save rather than invest. But we must now encourage people to use those savings to invest when they get rich," he said.

Japanese analysts said last night that lowering the tax rate on capital gains on share sales - currently higher than that on interests stemming from savings - could attract more individual investors into stocks.