Fears are growing that the Japanese government's latest plan to revive the economy will fall short of expectations.

Conflicting views from senior government figures are leading investors to fear that a decade of policy stagnation may not be over yet.

"Without action, there will be a crisis," said economist Andrew Smithers of Smithers & Co in Tokyo.

"The speed of deterioration could be very violent."

Waiting game

The package is due to be decided at a meeting of the Council on Economic and Fiscal Policy on Wednesday, with the twin aim of halting deflation and rescuing the country's banks from bad debts amounting to tens or hundreds of trillions of yen.

As part of that process, Masajuro Shiokawa, the finance minister, said he wanted the Bank of Japan (BoJ) to buy more government bonds, while the BoJ's governor, Masaru Hayami, said bank bailouts with public money are on the cards.

Mr Shiokawa also hinted that bailouts are part of the picture.

"I think the government's stance on public fund injections will become clear in the near future," he said.

Too little, too late?

But the draft released on Tuesday is disappointing, observers said.

It promises that "all necessary measures" will be taken, including public backing for the banking sector if it should prove necessary.

Sorting out the bad loans could reverse a five-year slide in lending, the result of the huge debt burden under which the banks are groaning.

So far, said, Kazunori Jinnai, general manager at Daiwa Securities' equity department, the plan looked unsatisfactory.

"The chances are growing that the government will not focus on speeding up the process of solving the bad loan problem this time," he said.

Conflicting views

Meanwhile, the ruling Liberal Democratic Party of which Mr Shiokawa and, of course, Prime Minister Junichiro Koizumi are members published its own proposals.

The LDP said it wants the Resolution and Collection Corporation (RCC) - the state body set up to take bad loans off the banks' hands - to boost its buying of loans to at least 2 trillion yen (�10.5bn; $14.9bn) by March 2003.

It also backs pumping public funds into the banking system, and calls for an inflation target to pull prices back into the black - an idea the BoJ still strenuously resists.

And it wants public money to buy bank shares held by, for instance, ailing insurance companies.

The banks themselves are not helping, Mr Shiokawa told reporters.

While allowing smaller customers to fold, they are still shoring up the bad debts of their large corporate debtors, he said.

"We have seen [bankrupt retailer] Daiei, as well as the Mutsui, Sumitomo and Fujita construction companies, rescued by their major banks, who are dealing with bad loan disposals," he said.

"But I have questions over the attitudes of the major banks towards these companies. Smaller companies are facing financial troubles because banks are asking them to repay debt.

"They should disclose the conditions for providing help to companies."

Reports over the weekend indicated that two real estate developers, Daikyo and Towa, are in line to receive as much as 600bn yen from their banks.