Japan is considering more steps to fire up its economy on top of a planned 12 trillion yen ($131 billion) in new spending and tax cuts as the economy probably shrank an annualised 10 per cent in the last quarter of 2008, a newspaper reported.

Economics Minister Kaoru Yosano has instructed ministries to informally craft policies aimed at reviving the economy, business daily Nikkei reported on Saturday without citing sources.

The global economic slump has virtually frozen Japanese exports and production of cars and electronics, and its economy is seen headed for its longest recession in modern times.

Yosano said last Sunday that Japan may need to consider additional spending to support its economy on top of the already planned stimulus.

A Reuters poll of economists showed the world's second largest economy probably shrank 3.1 per cent in the last three months of 2008, or an annualised 11.7 per cent, which would be the worst performance since the first quarter of 1974.

October-December gross domestic product data is due out at 8:50 a.m. on Monday (2350 GMT Sunday).

Parliament is now debating the government's record 88.5 trillion yen budget for the next fiscal year starting in April.

Once parliament winds up its deliberations and puts the finishing touches on next year's budget, Prime Minister Taro Aso will officially announce additional economic steps, with the process starting as early as April, the Nikkei reported.

The new measures are likely to focus on so-called New Deal policies, modeled after steps being pursued by US President Barack Obama, that are designed to improve energy efficiency, such as increased use of solar energy by residential homes and public buildings, it added.

Other likely steps include moving up public works projects for improved quake-proofing of schools and expanding fiber-optic networks, the newspaper said.-Reuters