Heizo Takenaka, minister of economic and fiscal policy, stated Tuesday that the April 1 termination of full bank deposit guarantees will go ahead as planned.
He also said the government had no immediate plans to inject ailing banks with public funds to help them replenish their capital bases.
"At present, the government does not assume a situation that would lead to the postponement (of the deposit cover change)," Takenaka told a news conference in Washington.
The termination of state-backed guarantees on time deposits at failed banks is an important step in introducing more competition into the banking sector, he said.
He did, however, leave open the possibility of recapitalizing banks with public funds in the event of the banking sector falling into a crisis.
But even under these circumstances, public fund use should be limited to "viable" banks, while management responsibility should be prioritized, Takenaka said.
Fears abound that mounting problem loans and falling stock prices may cause the banking system to collapse.
The planned introduction of the limited deposit guarantee system has amplified concerns that the public may make a run on the smaller banks.
Commenting on yen-dollar exchange rates, Takenaka said he does not think the current level is out of line with Japan's economic fundamentals.
He said there was little discussion of the exchange issue during his talks with U.S. officials in Washington.
"My impression was that they thought such issues should be left to the market," he said.