The role of a public entity should be expanded to sell government-guaranteed bonds and funnel the proceeds into the flagging stock market, the Japan Business Federation (Nippon Keidanren) said Monday.

Keidanren, the nation's most influential business lobby, issued a list of proposals intended to help Japan escape from recession, including job creation in the nursing and early education fields, and an expansion of the role played by a government-backed body set up to purchase stocks held by banks.

The Nikkei 225 stock average fell to a 26-year low Monday and has lost 20 percent of its value this year as the country heads for its worst postwar recession. Prime Minister Taro Aso said the government won't "directly intervene" in the stock market, while adding that he has already told Finance Minister Kaoru Yosano to pay "close attention" to price movements.

"We should come up with something to fix the demand and supply conditions," Fujio Mitarai, head of Keidanren, said.

Under Keidanren's proposal, the government-owned entity would sell bonds to fund the purchase of so-called exchange-traded funds that track the Topix stock index. The body would give the bond investors the option of converting them into ETFs should stock prices rise.

If stocks fail to gain and investors choose not to convert the bonds into ETFs, the government would compensate the entity for any losses. The Topix slid 1.5 percent Monday to 710.53, a level unseen since Dec. 20, 1983.

Later Monday, Vice Finance Minister Kazuyuki Sugimoto said the government will keep watching share price movements.

"We've been closely monitoring movements in the stock market and we will continue to do so," Sugimoto, the ministry's top-ranked bureaucrat, said. "Stock prices are determined by various factors, so I won't comment on their levels and possible reasons for fluctuations."