The rate of unemployment now stands at 4.8 per cent, the second straight month at this level and the highest since records began in 1953.

Many industrialised countries would be happy to have such a low level of unemployment, but for a country whose companies were once famous for offering jobs-for-life it is a bitter blow.

Prime Minister Keizo Obuchi described the figures as "a serious matter."

The chief of the Economic Planning Agency Taichi Sakaiya hinted at new government spending programmes to boost the country's faltering economy, speaking of the need to "draw up an extra budget" this year as "financial endorsement is necessary" to cut unemployment.

Sakaiya suggested that more than 100,000 jobs could be created through a mix of deregulation and government subsidies.

Deficit spending last year, Japan spent some 40 trillion yen ($330 billion) to kick-start the economy. Another 60 trillionyen are earmarked to revitalise the country's debt-burdened banks.

However, the impact on the economy has been marginal so far, while dramatically pushing up the government's budget deficit.

Takayo Hayashi, at the Sakura Institute of Research, said unemployment was "likely to continue to be severe for a while as the economy has not hit bottom".

Things are set to get worse, according to Susumo Okano at the Daiwa Institute of Reseach. He predicted a jobless rate of more than 5 per cent by the end of the year, calling the development "inevitable".