The Japanese government has increased by 23 trillion yen ($255bn; £171bn) its stimulus plan aimed at re-launching the country's economy.
More than half the amount will be used to bring stability to the financial markets, said prime minister Taro Aso.
The new economic plan comes after a 27 trillion yen package in October.
On Friday, the Japanese yen surged to its highest level against the US dollar in 13 years, sending stocks plunging and hitting the country's exporters.
"The economic situation is worse than expected, so we are going to offer some measures," said prime minister Taro Aso.
"We will try to be the first to get out of the recession, at least among industrialised nations," he added.
Fighting the recession
The new stimulus package also includes tax breaks and public financing projects worth 10 trillion yen.
In October, in a 27 trillion yen plan, Japan expanded credit for small businesses and offered cash payouts to families to encourage spending.
"Since then the economy has worsened beyond our expectations," Prime Minister Taro Aso said.
He said urgent measures were needed to fight unemployment.
Japan's economy, the world's second largest after the US, shrank by an annualised rate of 1.8% in the third quarter.
Japanese firms are closing factories and laying off staff in the face of declining global demand and a rising yen.
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