The world's biggest bank, Japan's Mizuho, has unveiled a plan to deal with its mountain of bad loans by March 2004.

The plan is the first response from the banking sector to the government's package of measures to address deflation and the bad debts crippling the country's economy. ,

The bank has lent 2 trillion yen ($16.4bn; �10.5bn) to 150 companies which are "near to failure" or have already collapsed, according to the Asahi Shimbun newspaper.

The report said the bank would try to write off up to 80% of the loans from next April.

The government's own deadline is 2005.

Short on specifics

The newspaper said the bank had originally planned to take longer but that the government's plan had encouraged it to speed up the programme.

Observers say a similar acceleration is under way at Japan's other banks.

Mizuho itself would not confirm the report, saying only that it was working in line with the overall government plan.

The measures, announced by the economics minister Heizo Takenaka on Wednesday, involve a phasing out of tax breaks and a massive tax cut.

More pain to come?

Mizuho's acceleration plans still leave trillions of debts unaccounted for.

Even at the government's estimate, the banks are groaning under 52 trillion yen in loans secured against real estate and shares which are now worth a fraction of their original value.

The only thing keeping many of the indebted companies viable is the fact that Japan's interest rate is effectively zero.

And many unofficial estimates of the scale of the problem set the overall debt burden at three or four times the government's figure.