The United States signaled it could consider buying into debt-laden banks to help get funds flowing through the financial system again after the IMF warned the world was on the brink of recession.
South Korea, Hong Kong and Taiwan followed on Thursday the U.S. Federal Reserve and central banks from Europe, Canada and China in cutting interest rates to contain the market meltdown that has destroyed lenders from Wall Street to Iceland.
However, the rate cuts underlined the grim economic outlook.
The International Monetary Fund (IMF) said the world was set for a major downturn in the face of the worst financial crisis since the 1930s.
Markets were mixed. Japan's Nikkei dipped to its lowest close in more than five years after a volatile day. European stocks opened higher after falling to near five-year lows on Wednesday despite the dramatic coordinated rate cuts.
"Just lowering interest rates would be far from sufficient in the current situation," said Amar Gill, head of thematic research at CLSA in Singapore.
"The main problem now is that banks are not lending to weaker banks, and the overall banking system is not lending to corporates."
Further steps are being taken to prop up the banks.
The New York Times, quoting unnamed government officials, said the Treasury was considering taking ownership stakes in many U.S. banks. A Treasury spokesperson could not be reached for comment on the story.
But U.S. Treasury Secretary Henry Paulson, speaking to reporters, stressed that the recently approved $700 billion financial bailout bill gave him wide authority to inject capital into the banking system and would not rule out having Treasury take an ownership position in banks if necessary.
The bank recapitalization plan, in its preliminary stages, has emerged as one of the preferred options being discussed in Washington and on Wall Street, the New York Times said.
The United States would be taking a leaf out of Britain's book. London said on Wednesday it was prepared to inject 50 billion pounds ($87 billion) of taxpayers' money into its banks and guarantee interbank lending.
POLITICAL COORDINATION
The crisis stems from the collapse of the U.S. housing market and the multiplication of bad debts. Confidence in banks has evaporated, making it harder and more expensive for business to get access to funds.
People around the globe are also reining in spending, fearful about the security of their savings and their jobs.
Following the move by central banks, there is heightened pressure on G7 finance ministers meeting in Washington on Friday to come up with their own coordinated approach to the crisis.
Britain is promoting a Europe-wide scheme to help the moribund financial sector and French President Nicolas Sarkozy replied that the European Union was discussing joint action.
In its latest sign of global financial contagion, Iceland took control of the country's biggest bank Kaupthing, the third such takeover in a week.
The governments of France, Belgium and Luxembourg agreed to guarantee borrowing by troubled financial group Dexia.
ECONOMIES SLOW
Economies across the world are already slowing. Japan reported a sharp slide in its closely watched machinery orders data, raising expectations that the world's second-largest economy was probably in recession.
The European Central Bank will cut its outlook for 2009 growth, executive board member Lorenzo Bini Smaghi said on Thursday.
Rate cuts from South Korea and Taiwan helped regional stock markets shake off some of the fear that dominated Wall Street even after Tuesday's unprecedented coordinated easing.
Investors remained deeply unsure about how much the joint easing would help. Money markets remained frozen and overnight dollar borrowing costs jumped as high as 7 percent in Asia.