By Yuzo Saeki and Simon Rabinovitch

In a further sign of the gloom enveloping Japan's economy, Sony Corp was reported to be cutting more than 2,000 jobs and a rise in the yen to multi-year highs added to the woes of exporters by driving up the cost of their goods in overseas markets.

"With growth in Asia and other emerging economies slowing, there is nothing to support Japanese exports," said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.

The global economy has deteriorated relentlessly since a credit crunch that began in 2007 with a U.S. housing slump took a turn for the worse in September with the collapse of Lehman Brothers.

In Washington, President Barack Obama's pick for Treasury Secretary, Timothy Geithner, told senators a detailed plan to rescue the U.S. financial system would be presented in the next few weeks.

Fresh worries that the poor health of banks and economies will require yet greater government intervention have sparked a new wave of risk aversion among investors, driving the Japanese currency toward multi-year highs against the dollar and euro and pushing investors into other safe havens such as U.S. Treasuries.

EXPORTS TUMBLE

Japanese exports in December tumbled an unprecedented 35 percent from a year earlier, data on Thursday showed, while a measure of business sentiment hit a new low.

The figures showed a collapse in demand across the board with record falls in shipments to the United States, Europe and Asia, showing how the global crisis is reaching all corners of the world economy.

The Bank of Japan, which has already cuts its rates to a razor-thin 0.1 percent, was expected to emerge from a two-day policy meeting later on Thursday with more details of how it will try to unglue financial markets by buying commercial paper and maybe even other corporate debt, as firms struggle to raise cash.

The yen rallied toward a 13-1/2-year peak against the dollar and a near 7-year high versus the euro hit the previous day.

The British pound resumed its fall against the dollar toward 23-year lows, erasing gains made after a source told Reuters that its slide will be discussed at the next meeting of the Group of Seven industrialized countries.

The pound has been under severe stress this week as a government rescue package for struggling British banks failed to reassure investors or stem losses in banking stocks. Barclays bank slid by a third to a 24-year low.

"Sterling still looks far from hitting a bottom with mounting expectations for further and bigger interest rate cuts from the Bank of England to combat the quickly deteriorating economy," said a senior trader at a Japanese trust bank.

Asia-Pacific stocks fell to a one-month low earlier on Thursday before swinging slightly higher on the day. U.S. Treasuries, a magnet for investors in times of uncertainty, were firmer in Asia trading.

In China, the world's main growth engine in recent years, official data showed that annual economic growth slowed to 6.8 percent in the fourth quarter from 9.0 percent in the third.

That left the pace of expansion for all of 2008 at 9.0 percent, a seven-year low and snapping a five-year streak of double digit growth. Illustrating the extent of the slowdown, China's economy had expanded 13 percent in 2007 to take over Germany as the world's third-biggest economy.

The country's statistics bureau said the financial crisis was spreading and continued to impact the Chinese economy, and that China would aim to stimulate domestic demand.

"The deceleration of growth is beyond the market's consensus, which presents a huge challenge to this year's growth target of 8 percent," said Jin Yanshi, chief economist at Sinolink Securities in Shanghai.

COLLAPSING TRADE

Neighboring South Korea said its economy suffered its second-largest contraction on record in the fourth quarter. That pushes Asia's fourth-largest economy closer to its first recession since the regional financial crisis a decade ago.

Gross domestic product fell a seasonally adjusted 5.6 percent in the last quarter of 2008 from the previous three months, more than twice as much as economists had expected, central bank figures showed.

Trade within East Asia has collapsed as global demand for goods such as cars and electronics shrivels, prompting leading manufacturers such as Toyota Motors to slash production at an unprecedented rate and lay off workers.

Sony said it was preparing to announce details of a restructuring plan later on Thursday. The Nikkei business daily said the firm will cut more than 2,000 jobs and revise its earnings guidance downwards.

In another sign of the pain being felt by the tech sector, Intel Corp said it was closing plants in Malaysia and the Philippines, along with its only remaining factory in Silicon Valley, cutting as many as 6,000 jobs.

U.S. BAILOUT

With hopes riding high that Obama will move quickly to tackle the crisis in the United States, U.S. Treasury nominee Geithner called for reform of the $700 billion bailout of the U.S. financial sector, or TARP.

He said a multi-pronged approach would be taken to stabilize housing, strengthen banks and support consumer credit.

"What the president is going to do is he's going to come before the Congress, we hope in the next few weeks, and lay out for the American people a comprehensive plan to help stabilize the core of our financial system," Geithner said.

The Financial Times reported on Thursday that American International Group Inc had kicked off the sale of its Asian life assurance unit in the hope of raising up to $20 billion to help repay a U.S. government loan.

(Additional reporting by Hideyuki Sano and Sachi Izumi in Tokyo, Zhou Xin in Beijing, Cheon Jong-woo and Yoo Choonsik in Seoul, Ritsuko Ando in New York and David Lawder in Washington; Writing by Alex Richardson..)