Japan's jobless rate jumped last month to its highest level since records began in 1953.

The higher than expected 3.9 per cent figure for March was up from 3.6 per cent in February. The figure released yesterday, together with falls in retail sales and industrial production, hit the bond market and further subdued the stock market.

Shares were already down on disappointment at the lack of permanent income tax cuts in the economic stimulus package announced last week. The benchmark Nikkei 225 index fell 1.6 per cent to 15,395, its lowest level since mid-January.

However, Mr Eisuke Sakakibara, the country's vice finance minister for international affairs, claimed that Japan's crisis was over and rejected suggestions the recent measures would be insufficient to revive the economy.

He said the financial system has been stabilised with an infusion of 30,000 billion yen ($227 billion). Additionally a stimulus of 16,000 billion yen will be injected from June, which he claims will lift Gross Domestic Product by 1.5 percentage points this financial year. "The package is huge but, because of widespread cynicism about Japanese policies, it may take time for confidence to return. I am confident this combination will work. I am not worried. The worst is over," he said.

Mr Sakakibara conceded that the industrial production data, retail sales figures and record unemployment looked troubling, but said: "We will have some bad months to come. But things will turn up. The worst thing to do is panic."

Fear of unemployment fed its way into retail sales, which fell an annual 13.8 per cent in March, although month-on-month seasonally adjusted figures rose 0.2 per cent. It was the first double-digit fall since data began being compiled in 1971. The Ministry of International Trade and Industry said year-on-year comparisons had been distorted by a rush in March last year to avoid an April increase in sales tax.

Faced with declining sales and substantial inventories, manufacturers cut back production 1.9 per cent in March.

The market's perception of weak growth prospects for the Japanese economy fed through to the government bond market.