The UN climate talks in Warsaw, Poland, were faced with a new crisis on Friday, after Japan, the world's fifth largest greenhouse gas emitter, slashed its plans to reduce emissions from 25% to just 3.8% on 2005 figures.

The move was immediately criticised as "irresponsible" and "unambitious" by developing countries and climate groups at the talks.

In a statement, the Alliance of Small Island States (AOSIS), a group of 44 low-lying island and coastal nations that are the most vulnerable to the effects of climate change, said: "[We] are extremely concerned that the announcement represents a huge step backwards in the global effort to hold warming below the essential 1.5-2 degrees celsius threshold, and puts our populations at great risk.

"This is neither the time nor the place to be backtracking on commitments. Developed countries have committed to taking the lead and must do so as we work to peak global emissions this decade and ink a new global agreement in 2015.

"We are also aware that the crisis now unfolding in the Philippines in the wake of typhoon Haiyan, which has also caused significant damage for our members in Palau and the Federated States of Micronesia, is just the latest in a series of climate-related extreme weather catastrophes."

Britain's energy and climate change secretary, Ed Davey, called the decision "deeply disappointing" and at odds with the need to tackle global warming.

He was still hopeful that the UK and other members of the G8 leading economies could encourage Tokyo to change its mind.

"It is deeply disappointing that the Japanese government has taken this decision to significantly revise down its 2020 emissions target. This announcement runs counter to the broader political commitment to tackle climate change, recently reaffirmed by G8, as well as the enhanced ambition we have seen from the world's major emitters," he argued in unusually robust terms.

"Yet I believe we can persuade Japan to change her mind again, to resume her leadership role in the world on climate change. Despite the challenges, if the public backs the government it can invest in low carbon electricity," he added.

However, Christiana Figueres, UNFCCC exective secretary, said she "understood" the problems that Japan faced following the 2011 earthquake and tsunami, which had forced the country to close 50 nuclear power plants.

"I do have some understanding that Japan has been hit by several catstrophes in the past few years. My hope is that Japan understands that investment in renewable energies galvanises investments and creates new jobs," Figueres said.

"This move by Japan could have a devastating impact on the tone of discussion here in Warsaw," said Naoyuki Yamagishi, WWF Japan's climate ands enrgy group leader at the talks. "This decision is a gross negligence of its responsibility and should be revised in line with the level that science and justice requires."

As compensation, Japan said that its public and private sectors intended to raise $16bn (£9.9bn) by 2015 to help developing countries reduce their emissions, with the intention of helping others to reduce the emissions that it could not.

The aid package is thought to include supplying developing countries with "green" technologies developed by Japanese firms, including offshore wind turbines, fuel-cell vehicles and high-tech housing insulation. No figures were given on the scale of the emission cuts that the package might achieve.

"The new target is based on zero nuclear power in the future. We have to lower our ambition level," said Hiroshi Minami, Japan's chief negotiator.

The talks in Poland, at which 190 countries are meeting to try to agree additional action to put the world on course to avoid dangerous climate change, have been overshadowed by typhoon Haiyan, which has increased the determination of developing countries to negotiate compensation for climate damage done in the past.

The Japanese announcement follows open criticism by Australia and Canada of policies aimed at reducing greenhouse gas emissions in their countries, and reluctance from the US and Europe to aim for more ambitious emissions cuts.

Oxfam's climate change spokesperson, Kelly Dent, said: "Japan's dramatic U-turn on its emissions target commitments is a slap in the face for poor countries who are right now struggling to cope with changes to their climate, and who will face yet more extreme and unpredictable weather in the future."

She added: "As one of the world's largest Co2 emitters, Japan has a responsibility to help lead the world in reducing emissions to ensure temperatures are kept at a safe level below 1.5 degrees celsius. Instead, their actions may well further erode trust in current negotiations which must deliver a global climate deal in 2015."