Mr Tanigaki says the failed bank is not typical

"I don't think there will be similar incidents," Sadakazu Tanigaki told Japanese television.

On Saturday, Mr Tanigaki agreed to take the regional Ashikaga Financial Group under state control, and inject up to 1 trillion yen (�5.3bn; $9.1bn).

But experts warned that Ashikaga could be just the tip of the iceberg.

"The deterioration of regional economies mirrors the financial troubles in regional banks," said Takehisa Hayashi, professor of finance at Tokyo University.

"It will come as no surprise if we see another Ashikaga case in the near future."

Regional variations

The Ashikaga case results from the feeble condition of Japanese regional finances, which are deteriorating even as the overall economy is starting to recover.

Since regional banks are heavily dependent on local governments, their balance sheets have suffered in parallel.

This is a separate problem from the main affliction of Japanese banks - their burden of bad debt.

The main Tokyo-based banks, the government insists, are now sound, and the Ashikaga case does not signify anything about their financial health.

But experts warned that the overall bill for Japanese taxpayer could be crippling if more regional banks require a state bail-out.

Cruel, or kind?

The Ashikaga affair has reignited the debate on how best to deal with Japan's financial system.

Some experts argue that financial crippled banks should be allowed to fail, thereby saving public money and sending out tough free-market signals to the sector as a whole.

But public sentiment is in favour of injecting state funds into the banking system.

Most neutrals have agreed that some government money is required, but say the state should be far more aggressive in demanding management changes at stricken lenders.

The government has a number of programmes to provide funds for failing banks and companies, and sceptics point out that most of the current beneficiaries have received government help before.