NEW YORK/LONDON, Oct 30 (Reuters) - The U.S. economy shrank in the third quarter as the financial crisis raged while Japan and Germany said on Thursday they would spend billions of dollars to provide a cushion against a deep global recession.
The spending measures would complement a series of interest rates cuts, including the latest round of global monetary easing from China, Norway and the United States on Wednesday.
Japan may cut rates on Friday and the European Central Bank, Britain and Australia are expected to follow next week, which would come just as data show a rapid deterioration in major economies.
The world's largest economy shrank at a 0.3 percent annual rate in the third quarter, the sharpest contraction in the United States in seven years. The spectre of recession prompted businesses to cut investment and unnerved consumers, who slashed spending at the sharpest rate in 28 years.
While the data was not as bad as some feared, economists expected a sharp deterioration in during the final three months of 2008, which began this month with a stock market crash, a credit freeze, and huge jobs cuts by U.S. companies.
"The economy is pretty lousy. It's unlikely to improve in the near term," said Keith Hembre, chief economist, at FAF Advisors in Minneapolis.
Japan, the world's second biggest economy, unveiled a 5 trillion yen ($51 billion) package of spending measures to support its economy and Germany planned a range of steps worth up to 25 billion euros ($32 billion) to boost business.
"A harsh storm seen only once in 100 years is raging," Japanese Prime Minister Taro Aso told a news conference. "Under such circumstances, I am certain that what is most important is to remove uncertainties from the lives of people."
A leading member of Germany's ruling Social Democrats (SPD) told a newspaper that the government planned to introduce a range of steps to bolster the economy next week.
"All together we are talking about a volume of perhaps 20 billion euros to 25 billion euros," Peter Struck, parliamentary floor leader of the SPD, which shares power with Chancellor Angela Merkel's conservatives, told the Berliner Zeitung.
The package will include support for car makers and building renovation as well as tax breaks enabling companies to write off a share of their investments, German newspapers reported.
There was encouraging news from the banking sector. Closely watched rates on bank-to-bank borrowing fell on Thursday, helped by the U.S. Federal Reserve's rate cut on Wednesday and also currency swap lines to ease dollar funding tightness around the world..
Japan's benchmark Nikkei average index closed up 10 percent, a third straight day of gains. European shares climbed 2 percent and on Wall Street, the Dow also opened 2 percent higher.

Governments are desperate to put measures in place to protect their economies against recession, which euro-zone statistics suggested had hit much of Europe.
Economic sentiment in the 15-nation currency bloc plunged to its lowest level since 1993 in October, official data showed.
"These are very bad. It's a clear signal the euro area is in recession," said Christoph Weil at Commerzbank.
Poor corporate earnings and forecasts for 2009 supported the view that the downturn would be long-lasting.
Britain's WPP Group, the world's second-largest advertising firm, warned that 2009 would be very tough.
In Asia, South Korea's Hynix Semiconductor, the world's No. 2 memory chip maker, reported its worst quarterly net loss in nearly eight years, saying the future looks grim.
Two of the largest U.S. auto parts makers, BorgWarner Inc and Tenneco Inc, said the economic crisis would mean more job cuts and plant closings.
The International Monetary Fund said it was more worried by the slowdown than market volatility, adding it would propose a new regulatory strategy at next month's meeting of the Group of 20 nations.
"The IMF's role as the coordinator of global regulation must be reaffirmed," IMF chief Dominique Strauss-Kahn told French daily Le Monde.
He said the Fund's resources were insufficient to meet requirements over the medium term. Countries have lined up to gain funds from the lender, with Turkey the latest to say it was continuing talks at a technical level on a possible precautionary stand-by agreement.
Pakistan's top economic adviser said the country had no alternative but to seek money from the IMF to cope with dwindling foreign reserves and a balance-of-payments crisis.

Across the world, countries are using any means to make sure businesses do not fail.
Russia's state bank said it expected to pump around 5 billion roubles ($183.2 million) into the stock market, sending shares higher.
The government disbursed around $3 billion to billionaire Mikhail Fridman's Alfa Group and state oil major Rosneft to help finance their foreign debts, government and industry sources said.
On Wednesday, Russia's richest man, Oleg Deripaska, became the first beneficiary of the rescue plan, when his flagship company secured a $4.5 billion loan needed to keep its stake in metals producer, Norilsk Nickel.
The United States cut interest rates to 1 percent on Wednesday to try to kickstart its economy.
The rate cuts and a U.S. move to offer funds to Brazil, Mexico, South Korea and Singapore via four new currency swap lines worth $30 billion spurred Asian markets.
(Reporting by Reuters bureaus worldwide; Editing by Tom Hals) ($1=96.99 Yen) Keywords: FINANCIAL/

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