TOKYO - JAPAN'S parliament on Thursday enacted an US$18 billion (S$26.7 billion) emergency spending plan to stimulate Asia's largest economy as fears of a recession grow.

The opposition-led upper house approved the extra spending bill, a little more than one week after it was passed by the lower house, which is controlled by Prime Minister Taro Aso's coalition, officials said.

The 1.81 trillion yen plan includes measures to help consumers, companies and farmers cope with high fuel costs and a credit crunch.

It is part of an 11.7 trillion-yen emergency package announced in late August. The rest of the plan consisted mainly of lending related measures.

The opposition went along with the spending bill as part of its push for Mr Aso to call snap elections. Mr Aso has said he will first focus on boosting the economy.

Tokyo's Nikkei stock index plunged more than 11 per cent on Thursday, its biggest loss in two decades, on growing fears of a global recession.

Mr Aso, a supporter of government spending to boost the economy, has also pledged to work on a second extra budget, setting aside efforts by earlier premiers to reduce Japan's public debt, which is the highest among industrialised nations.

Japan's economy suffered its worst contraction in seven years in the second quarter of this year and many analysts believe it is already in recession, which is usually defined as two straight quarters of negative growth. -- AFP