And the Bank of Japan has been asked to to do more to help.

We need to prevent deflation by using all possible measures

Heizo Takenaka Economic Minister

The world's second biggest economy is in recession, with huge debts and spiralling deflation.

Last week's blueprint focused on two issues: supporting the stock market and tackling bad debt at the banks, which some analysts view as technically insolvent.

Finance Minister Masajuro Shiokawa told a news conference on Tuesday: "The Cabinet Office is preparing a second-round of the anti-deflation package.

"It will be an expansion of the five-point plan recently released.

"We need to announce more detailed measures, based on the basic policy."

A top economic council chaired by Prime Minister Junichiro Koizumi released a plan to reverse Japan's price slide last Wednesday.

Pressure

Analysts said the package was too broad and short on specific commitments to help banks dispose of bad loans, stabilise the financial system, strengthen stock markets and help smaller firms.

But government steps to restrict the short-selling of stocks by wayward brokers are credited with boosting the Tokyo stock market.

The benchmark Nikkei share average enjoyed a four-day, 12% climb until Monday. It closed down 0.89% on Tuesday.

Gross domestic product statistics for the October-December quarter are due out on Friday and are expected to confirm the economy is in its worst recession for decades.

Shiokawa prepares more plans

The Bank of Japan (BoJ) is under pressure from the government to do more with monetary policy.

State Minister for Economic and Fiscal Policy, Heizo Takenaka, suggested the central bank should decide on measures to implement the government's policy goals.

He said: "Monetary and structural reform policy are entering unknown territory and it is unclear to what extent monetary (policy) should go forward.

Request

"However, we need to prevent deflation by using all possible measures.

"We will not stop our efforts to work out measures."

BoJ governor Masaru Hayami countered by saying government reforms are needed to make monetary policy work.

He said: "Structural reforms through deregulation...are prerequisites. That's a request to the government."