TOKYO: Japan's economy grew at a much slower rate than previously thought in the third quarter, fresh data showed Wednesday, as the country struggles to emerge from a crushing recession weighed by a soaring yen.

The world's number two economy expanded at an annualised rate of 1.3 percent in the July-September quarter, sharply down from the original estimate of 4.8 percent, the Cabinet Office said.

It meant the economy -- which early this year emerged from its worst post-war recession -- expanded just 0.3 percent in the three months, compared with the initial estimate of 1.2 percent, it said.

The revision came as capital investment, the amount companies spend, was revised down to reveal a contraction of 2.8 percent from an original estimate of 1.6 percent growth, the Cabinet Office said.

Prime Minister Yukio Hatoyama admitted the difficulty of navigating the economy out of deep stagnation and stressed the benefits of a new government stimulus package announced Tuesday.

"As the Japanese people are already feeling, the economy is not necessarily doing fine," he told reporters. "I would like to take appropriate economic policies going forward."

His government announced a fresh stimulus package worth 274 billion dollars, with 80 billion dollars in direct spending, that includes environmental programmes, assistance for small businesses and help to local communities.

"If you look at our new economic growth strategies, you will feel that things no longer match the status quo," Hatoyama said, referring to his centre-left party's election win that ended decades of conservative rule.

Hatoyama has been criticised as being too slow to act, with the latest package seen as likely to have only a limited effect on the economy.

Private economists on average expected the revised data to show annualised growth of 2.7 percent, with most saying the original estimate was too high.

Japan's economy has struggled as the yen strengthens against the greenback -- with it hitting a 14-year high around 84 to the dollar -- hurting exporters by making their products expensive and reducing overseas earnings when converted back into yen.

The government last month declared the nation was in deflation, while consumer spending remained weak.

"The domestic economic sentiment has been terrible," said Masamichi Adachi, senior economist at JP Morgan Securities.

"The three reasons for the terrible sentiment are the yen's rise, deflation and mistrust in the government's policies."