An aging, even failing, parent still carrying a grown-up child piggyback is about to stave off collapse by finally letting the child walk by itself -- at least for a short distance.

According to government sources, Japan may trim yen loans to China by 10 percent to 25 percent for the current fiscal year to March 31, reversing more than two decades of a continued increase in low-interest loans.

In yen terms, the cuts would be between 20 billion yen and 50 billion yen.

The sources said the government will draw up a draft fiscal 2001 yen-loan program for China through consultations with the Finance Ministry, Foreign Ministry and the Ministry of Economy, Trade and Industry, and present it to the ruling Liberal Democratic Party for approval as early as the end of this month.

The new loans will focus on projects to protect the environment and develop the poorer inland areas of the vast country.

After getting approval from the LDP for the draft fiscal 2001 China loan program, the government will exchange diplomatic notes on the provision of fresh yen loans for fiscal 2001 with the Chinese government by the end of March, the sources said.

Consideration of such a large cut in China-bound yen loans reflects fiscal austerity measures and a growing domestic view that Japan's generous economic aid to China is enabling the Communist giant to build an increasingly ascendant military and economic juggernaut.

"It will be unavoidable to cut yen loans for China to a level that is acceptable to the Japanese public, which has come to take a skeptical view of the huge size of the loans for domestic budgetary, bilateral political and economic reasons," one government source said.

Since taking office last April, Prime Minister Junichiro Koizumi has put rehabilitation of Japan's debt-laden finances ahead of stimulating the slumping economy through government spending.

An austere government budget for fiscal 2002 -- the first full-year budget of the Koizumi government -- will be presented to a 150-day ordinary Diet session convening Monday and call for a 10 percent cut in overall official development assistance.

Under the overall ODA spending-reduction plan, yen loans will be hit harder than the two other types of ODA extended directly to developing countries -- grants-in-aid and technical cooperation. Yen loans will be chopped by about 23 percent.

It remains uncertain, however, how much the fiscal 2001 yen loan program for China will be slashed because some lawmakers within the LDP are expected to demand a reduction sharply in excess of 25 percent.

If the reduction is between 10 percent and 25 percent, it is unlikely Sino-Japanese relations would suffer much. But if the reduction is well over 23 percent under the fiscal 2002 budget, it might offend -- and even anger -- China, which would likely perceive the cut as a punitive measure rather than a budgetary constraint.

Since Japanese ODA money began flowing into China in the late 1970s -- when the communist-ruled country embarked on free-market reforms at the behest of the late paramount leader Deng Xiaoping -- China has tended to take huge amounts of Japanese ODA for granted.

China considers the aid the price Tokyo agreed to pay for Beijing dropping its demand for wartime reparations when the two countries established diplomatic ties in 1972 and has always reacted bitterly to any move to link ODA to bilateral tussles.

In addition, China is likely to consider any Draconian cuts in yen loans as a broken promise. During a meeting in Hanoi last July, Foreign Minister Makiko Tanaka told her Chinese counterpart, Tang Juaxian, that any reduction in overall ODA would not be targeted at China alone.

But there are growing calls for drastic reductions in China-bound yen loans from political and business circles amid China's rapidly rising economic and military might.

China has continued to boost military spending at a double-digit pace for more than a decade and is widely seen as the biggest potential threat to peace and stability in the Asia-Pacific region.

The importance of China on the global economic stage is also growing rapidly and will be further fueled by its admission to the World Trade Organization in December. China is already the world's seventh largest economy, with about $1 trillion in gross domestic product.

China itself is also extending economic aid to other developing countries.

Japan, the world's second-largest economy, has been mired in an 11-year economic slump. In that time, some Japanese have come to perceive China as an economic threat, as evidenced by the recent trade spat stemming from Japan's imposition of "safeguard" import restrictions on some Chinese farm products.

In the past two decades, Japan has pledged the amount of yen loans to China on a multiyear basis rather than on a single-year basis, as it does with all other developing countries. But that favorable arrangement will no longer apply to fiscal 2001 and beyond under an agreement reached between the two countries a few years ago.

Japan committed and disbursed 390 billion yen for 28 infrastructure and other development projects during fiscal 1999 and 2000. It was the second and last phase of a fourth multiyear loan package. As the first phase of the package, Japan extended 580 billion yen for 40 projects from fiscal 1996 through fiscal 1998.

Japan has retained its status as the world's largest single aid donor over the past 10 years.