Japan's prime minister says he will compile a fourth extra budget to support the economy amid the growing effects of a strong yen, flooding in Thailand and the eurozone crisis.
Prime Minister Yoshihiko Noda told a news conference that he has instructed Finance Minister Jun Azumi to begin compiling the additional budget for the fiscal year that ends in March.
The budget is aimed at addressing "the growing sense of uncertainty due to developments such as the high yen, flooding in Thailand and eurozone debt crisis," he said.
Noda said the additional budget will not be funded by government bonds, but rather through administrative cost-cutting.
He did not elaborate on the size of a planned budget.
Noda's government has passed three sets of supplementary budgets this year totalling some 18 trillion yen ($A225.96 billion) to fund reconstruction projects in areas affected by the March 11 earthquake and tsunami and ensuing nuclear crisis.
The triple disasters hit at a time Japan's economy has been stagnating for more than a decade, its public debt ballooning and population shrinking and aging.
Exports, corporate investment and consumer spending have been all falling in recent months.
Europe's sovereign debt problems have triggered concerns about the global economy, sending investors to flock to the yen as a safe haven.
The yen has tested historic highs against the dollar this year and forced major manufacturers to shift some production out of Japan.
A strong yen shrinks the value of overseas profits when repatriated and makes Japanese products more expensive in overseas markets.
Japanese manufacturers were also hit by flooding in Thailand, where many of their factories are based, just as they were recovering from the production slide cause by Japan's own disasters in March.
Noda said Japan needs to tap onto China's development.
Despite occasional spats, stronger relations with China "will be in the interest of the region and in the interest of peace, stability and prosperity of the world," Noda said.
He said he hoped to have concrete discussions to further deepen "this mutually beneficial relationship based on strategic interests" with Chinese leaders during his China visit being arranged for later this month.
A potential three-way trade agreement among Japan, China and South Korea "should be negotiated early on," he added.
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