Japan swung to its first current account deficit in 13 years in January as exports collapsed, and a key U.S. policymaker said a coordinated global effort was needed to boost demand and drag the world out of recession.
Unemployment in the United States rose to a 25-year high last month as firms axed workers in the face of a severe recession, but financial markets took some comfort from the fact that monthly job losses of 651,000 were not as high as some had feared.
Ahead of the jobs report there had been rumors about a possible loss of 1 million jobs, but the result turned out to be basically in line with expectations, said a trader for a Japanese trust bank.
The dollar dipped against the yen and euro on Monday as investors trimmed safe-haven buying of the U.S. currency.
Asian share markets were mostly weaker, with Japan's Nikkei hurt by falls in the stocks of car makers, such as Honda Motor Co, due to fears about the fallout for the industry if struggling General Motors were to fail.
Japanese data on Monday revealed a record current account deficit, with the income surplus tumbling about a third from a year earlier, as the global recession crushed export demand and income from overseas investments.
The contraction in Japan's main export markets is pushing firms such as Toyota Motor Corp and Sony Corp deep into the red, prompting job and production cuts and setting the economy on course for its longest recession in modern times.
We have seen the declines in exports, and now we see the income balance declining because the global financial crisis is cutting earnings on overseas investments, said Akira Maekawa, senior economist at UBS.
This is a bad development for an export-oriented economy.
Underlining how a crisis that grew out of a U.S. housing market slump has spread from the rich world throughout the globe, the World Bank said developing countries could face a financing gap of $270-$700 billion this year as trade income dwindles.
The World Bank said even at the lower end of that estimate, resources of international institutions would not be sufficient to meet the financing needs as more and more emerging and developing countries are hit.
Should a more pessimistic outcome occur, unmet financing needs will be enormous, the World Bank said.
The gloomy report came in a paper prepared for a summit in London next month of the G20, which groups the world's richest nations and biggest emerging economies. To prepare for that summit, G20 finance heads meet this weekend in England.
Much of the industrialized world, including the United States, Japan, the euro zone and Britain, are in the grip of a deep recession, and emerging economies are feeling the squeeze from plunging demand and frozen credit.
Britain's downturn will be deeper than previously thought, the British Chamber of Commerce said in a report on Monday that forecast an economic contraction of 2.8 percent this year.
The Bank of England has cut interest rates to a historic low of 0.5 percent and last week said it would begin quantitative easing -- buying assets such as government bonds with newly created money -- in an effort to kickstart growth.
Deputy Governor Charles Bean said Britain was in the early stages of a particularly nasty recession and the action was needed to shorten the downturn.
We have the scope to do more if that proves necessary, he wrote in an editorial in Monday's Daily Mail.
State action was also the theme of comments from U.S. President Barack Obama's chief economic adviser in an interview with the Financial Times.
The right macro-economic focus for the G20 is on global demand and the world needs more global demand, said National Economic Council Director Larry Summers.
This notion that the economy is self-stabilizing is usually right, but it is wrong a few times a century. And this is one of those times.
(Reporting by Reuters bureaux worldwide; Writing by Alex Richardson; Editing by Neil Fullick)