Most leading Japanese companies expect the country's economy to worsen in 2009 amid uncertainty over the state of U.S. economy and deteriorating domestic demand, a survey by the Mainichi newspaper showed on Sunday.

Eighty-five percent of the companies surveyed said Japanese economic conditions will continue to deteriorate in 2009, while 13 percent said the economy would remain in bad shape but not worsen, the newspaper said.

No company surveyed expected the economy to improve this year.

Mainichi conducted the survey between early and mid December, polling 121 leading companies, including Sony and Nissan Motor.

More than 60 percent of the companies do not expect the world's second-largest economy to bottom out until 2010, the poll showed. No companies expected a recovery during the first half of 2009, while 22 percent expected the economy would recover ing the second half of this year, it showed.

Japanese exports posted a record annual fall in November as companies felt the pinch from a strong yen and weak global demand, adding gloom to an economy already in recession.

The decline came as the global financial and credit crisis hurts Japan's major export destinations, with the United States in recession and once fast-growing Asia economies seeing slowing growth.

The Bank of Japan's tankan survey for the fourth quarter, released in December, showed that business sentiment has slumped to its most pessimistic in nearly seven years.

The government has unveiled an 88.5 trillion yen ($960 billion) budget for the fiscal year starting in April, the nation's biggest ever, in a bid to stave off an even deeper and longer downturn.

That budget, along with two other extra budgets for the current year, will finance 12 trillion yen in fiscal stimulus programmes, which amounts to more than 2 percent of Japan's gross domestic product.

The central bank cut its key policy rate to 0.10 percent last month, the lowest since 2006, and moved to pump funds into the market to ease a corporate credit crunch at the end of the year.

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