* Japan exports plunge 45.7 percent to 10-year low
* German Q4 GDP in record contraction on weak exports
* EU needs new supervisory bodies urgently-draft report
* Bernanke, Darling reassure on nationalisation concerns
By Yuzo Saeki and Huw Jones
TOKYO/BRUSSELS, Feb 25 (Reuters) - Plunging exports drove Japan's trade deficit to a record high in January and caused a sharp contraction in Germany as EU plans took shape to bolster financial supervision blamed for exacerbating the global crisis.
Car exports from the world's second largest economy fell by two-thirds from a year earlier, as Japan's overall exports fell by 45.7 percent to hit a 10-year low in value.
"Exports to Asia, particularly to China, are tumbling at about the same pace as shipments to the United States, signalling that even China's economy may be shrinking," said Takeshi Minami, chief economist at Norinchukin Research Institute.
Shrinking exports pushed Japan's trade deficit to a record 952.6 billion yen ($9.82 billion), in an export-oriented country where sales of major brands in cars, technology and other sectors have been major drivers of growth.
A sharp drop in exports was also blamed for a record 2.1 percent contraction in Europe's biggest economy as Germany's gross domestic product (GDP) in the final quarter of 2008 posted its worst performance since reunification in 1990.
"The outlook for the current quarter is anything but good," said Ulrike Kastens, economist at Sal. Oppenheim. "There are still no signs of a recovery."
Aiming to stabilise rapidly slowing economies, governments continue to offer stimulus and even direct investment in major lenders, while reforming oversight to instil greater market confidence.
A draft report to the European Commission seen by Reuters on Wednesday said financial sector oversight across the 27-nation European Union was too weak and in need of urgent repair.
Two new pan-EU bodies should be set up to monitor risks and improve coordination, according to the draft report prepared by a group headed by former French central bank boss Jacques de Larosiere.
The draft is a blueprint for how the EU is expected to tackle financial sector supervision, blamed for being too weak to prevent the global crisis or to restore the confidence now needed to stabilise roiled markets.
"A European System of Financial Supervisors should be set up. This ESFS should be a decentralised network," it said.
It also recommended a new "European Systemic Risk Council" be chaired by the ECB and include representatives of banking, insurance and securities supervisors.
NATIONALISATION JITTERS
In Asia Japanese stocks managed to shake off the bad export news with the Nikkei average gaining 2.65 percent, encouraged by a report in the Nikkei business newspaper which said the government is considering using public funds to buy stocks directly from the market.
While investors cheered that news, jitters over too much state ownership persist, drawing an assurance by Federal Reserve Chairman Ben Bernanke on Tuesday that battered U.S. banks should be able to weather the steepest downturn in decades without being fully nationalised.
"I don't see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalise a bank when it just isn't necessary," Bernanke told the Senate Banking Committee.
British Finance Minister Alistair Darling touched on the same sensitive topic in an opinion piece in the Financial Times newspaper on Wednesday: "It is important that the banks' equity will continue to be owned by institutional and individual investors as well as by the government."
The UK said last month it would convert preferred shares it holds in Royal Bank of Scotland, raising a stake of 58 percent it already holds in the lender.
Darling is expected to unveil details of the government's asset protection scheme in the next few days to help prevent full nationalisation of the country's top banks.
France is also poised to take preferred shares and an eventual 20 percent stake in what will be the country's second largest bank pending a planned merger between Banque Populaire and Groupe Caisse d'Epargne, a highly placed government source told Reuters.
French President Nicolas Sarkozy has been criticised over the expected appointment of the president's deputy chief of staff, Francois Perol, as head of the new merged bank.
(Reporting by Reuters bureaus worldwide; Writing by Alan Wheatley and Jason Neely; Editing by Richard Hubbard)