The Japanese government today began debating an extra budget to shore up the tottering economy but kept financial markets guessing over whether it would boost spending or just make up for tax revenue shortfalls.
The move comes after figures showing growth in the world's second-largest economy slowed in the July-September quarter, which fuelled expectations of further economic deterioration ahead.
Japanese Prime Minister Mr Junichiro Koizumi said the budget was to cover an expected shortfall of around 2.7 trillion to 2.8 trillion yen ($22.42 billion to $23.25 billion) in tax revenue in the fiscal year ending in March.
The Nikkei index, which closed at a 19-year low a day earlier on a sell-off in bank stocks, bounced 2.41 per cent to recover the 8,500 mark today.
Traders cited the extra budget news as one supporting factor for stocks, although they gave more credit to a rise in Wall Street shares.
Besides covering tax shortfalls, the extra budget is likely to focus on safety-net measures to soften the impact that banks' bad loan disposals may have on jobs and smaller firms.
Japan's jobless rate has been hovering at 5.4 per cent in recent months, just below a record 5.5 per cent, but economists expect it to rise further, particularly as banks are expected to start taking a tougher line on borrowers.