Japan in recession; Citi slashes jobs; autos stress

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By Jeremy Gaunt and Patricia Zengerle

LONDON/WASHINGTON (Reuters) - Japan on Monday became the latest major economy to fall into recession, with France close behind, and U.S. stocks followed world markets lower after Citigroup said it would cut 50,000 jobs, adding to worries the slump may deepen further.

After a weekend meeting of the world's 20 largest economies failed to come up with new stimulus measures to ease global financial strains, the IMF said it needed at least $100 billion to fight the crisis.

Citigroup, the U.S. bank with the farthest worldwide reach, gave markets an unwelcome reminder of the financial industry's woes with news it would cut about 15 percent of its workforce. That came on a day the battered auto industry took center stage around the globe.

The U.S. Senate was to debate a bailout of American car firms, Germany said it was ready to help General Motors Corp's Opel unit and Japan's Toyota came under ratings scrutiny.

U.S. markets responded with a sharp drop, with major indexes down around 2 percent after steep losses on Friday.

Japan surprised markets with data showing the world's second-biggest economy fell into its first recession in seven years as the financial crisis curbed demand for Japanese exports. The 0.1 percent contraction in July-September was worse than consensus forecasts.

The euro zone was also in formal recession, with two consecutive quarters of contraction, and Britain and the United States are on the brink while China is slowing sharply.

Britain's main employers group forecast that unemployment could rise to almost 3 million by 2010 and France's central bank said the French economy should contract 0.5 percent in the fourth quarter.

Policy-makers have little doubt that their economies will continue to decline.

"We need to bear in mind that (our) economic conditions could worsen further as the U.S. and European financial crisis deepens, worries of economic downturn heighten and stock and foreign exchange markets make big swings," Japanese Economy Minister Kaoru Yosano told a news conference.

International Monetary Fund Managing Director Dominique Strauss-Kahn told the BBC his organization would likely need at least $100 billion in extra funding over the next six months to help countries survive the downturn.

G20 LAUNDRY LIST

Global markets shuddered under the joint strain of declining economies and ructions in the financial system. Oil fell more than $1 to below $56 a barrel and MSCI's main world stock index was down three-quarters of a percent for a 46 percent year-to-date loss.

Markets were unimpressed with the weekend meeting of the G20 in Washington, which agreed on some steps to tackle the world economy but left it to individual governments to tailor their response to their own circumstances and troubled industries.

"The economic outlook is worrying and no solution has been found short term. People are expecting things to get worse as economic data continues to look poor and, in the absence of anything else, that is helping to push prices lower," said Simon Wardell, analyst at economic consultants Global Insight.

The G20 statement said that all financial markets, products and participants would be subject to supervision. It also vowed tougher accounting rules, a review of compensation practices and greater cooperation between national regulators.

Finance ministers were told to develop specific plans, with the first set of actions to be completed by the end of March and a follow-up meeting held by the end of April.

CAR TROUBLE

With a $700 billion fund promised to stabilize the battered U.S. financial system, the outgoing Bush administration and its successor were set to tackle the urgent question of how, or whether, to rescue the nation's "Big Three" automakers.

The Senate was to begin debating emergency legislation to provide $25 billion in aid to General Motors, Ford Motor Co and Chrysler LLC.

In Europe, the German government has said it is ready to talk with Opel, but would not offer blanket aid to entire industries suffering due to the financial crisis.

Officials from the finance and economy ministries and German states will hold talks on Tuesday to discuss the broader woes in the car industry.

Japanese car giant Toyota Motor Co was put on a negative ratings watch by Fitch Ratings because of the global downturn and the stronger yen. It cited "unprecedented challenges" in the automotive industry.

Toyota is one of the rare companies to have a top-notch "AAA" rating.

(Additional reporting by Reuters bureaus worldwide; editing by Dan Grebler)

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