Thousands of Japanese workers have already been laid off
The Japanese cabinet has approved another $54bn (£36bn) package of spending, to try to ease the recession.
It is the second extra budget approved by MPs and is designed to help finance tax cuts for homeowners, loans to small businesses and aid laid-off workers.
Last week, the government increased its economic stimulus plan by $255bn (£171bn).
The Bank of Japan cut its benchmark interest rate to 0.1%, on Friday in a bid to kick-start the economy.
The BOJ also announced that it would increase its purchase of Japanese government bonds to 1.4 trillion yen ($15.7bn; £10.5bn) a month, up from 1.2 trillion yen.
The government has forecast zero growth in the year ending March 2010.
Japan, the world's second largest largest economy, is already the most indebted country in the developed world.
In all, the Japanese government will need to raise about $114bn to fulfil its spending plans.
The finance plans set out by Prime Minister Taro Aso mean Japan will have to do more borrowing.
The BBC's Duncan Bartlett in Tokyo says some politicians within Mr Aso's own party have balked at the sums involved and his personal popularity rating with voters has fallen sharply.
After 2001, Japan enjoyed its longest period of economic growth since World War II until the sub-prime crisis started a year ago.
The global downturn has led to global demand falling significantly, while a rising yen has also hit exporters.
Japan's economy slipped into its first recession in seven years after two quarters of negative growth in a row.