Confidence in Japanese business has fallen to an all-time low as the world’s second largest economy experiences its worst period of recession for half a century.

A survey by the Bank of Japan measuring the percentage of large Japanese firms who feel business in the country is succeeding found confidence had dropped to minus 58 in the three months to March.

This was more than double the figure of minus 24 for the previous quarter, and one point down from the 1975 record of minus 57.

The Japanese economy has been severely damaged by the global recession, with a drop in demand for manufactured goods and cutbacks in car production leading the International Monetary Fund to predict the Japanese economy will shrink by 5.8 per cent this year.

The central bank’s research, known as the Tankan survey, looked at 10,000 large manufacturers and suggested confidence figures for small and medium sized firms would not be any better. It predicted the next quarter would see overall confidence remain low at minus 51.

The news comes as prime minister Taro Aso ordered the Japanese government to come up with a third stimulus package for the country’s struggling finances. Mr Aso has already authorised two stimulus packages worth a combined 75 trillion yen (£524 billion).

Unemployment figures released yesterday also showed the number of people out of work was up 4.4 per cent for February, bringing the total number of unemployed in the country to 330,000, and household spending is reported to be down by 3.5 per cent.

Mr Aso said: “Japan is still facing the economic crisis. I instructed the government and ruling parties to compile steps to cope with the current economic situation, which will include submission of the extra budget.”