Tokyo stocks tumbled across the board again this week, mirroring a wholesale collapse in investor confidence.

Public confidence in Prime Minister Junichiro Koizumi has been badly shaken, stirring up skepticism about the 30 trillion yen-a-year ceiling on new government bond issues -- a symbol of his administrative reform initiative.

There has been mounting alarm in the financial community that a "sell Japan" mentality may be developing.

Late last year, Moody's Investors Service Inc. lowered its rating on yen-denominated securities issued or guaranteed by the government.

Other credit rating agencies have followed suit, maintaining a negative outlook on such securities, sending government bond prices reeling.

On Wednesday, the yield on 10-year government bonds, which moves in inverse proportion to prices, hit 1.54 percent, the highest since January 2001.

Domestic financial institutions now hold some 40 percent of the outstanding balance of government bond issues -- 350 trillion yen -- and are now left with huge latent losses on their holdings.

Against this backdrop, banking issues have taken a battering almost daily in recent months, keeping the yen under downward pressure.

Unmistakably, overburdened by bad loans, banks are facing a critical phase in the February-March period.

The mark-to-market accounting rules newly applied on cross-held shares have prompted banks to unload their equity holdings.

They are expected to step up writeoffs of nonperforming loans before they close their ledgers on the current fiscal year in March, a move that could pose a serious threat to the continued existence of heavily indebted companies.

The government is indicating a willingness to infuse more public money into ailing banks. It remains to be seen, however, if any of them will turn to the government for such help, which could result in a plunge in public confidence in their management.

It also remains unclear how far the government intends to go in forcing the disposal of bad loans at the cost of more bankruptcies.

The market is looking to the government for quick moves to avert a financial crisis and keep stock prices from falling further.