Prime Minister Junichiro Koizumi on Friday rejected calls from senior legislators and bankers to postpone plans to cap deposit guarantees at failed banks, scheduled to take effect April 1.

Currently, demand deposits are fully guaranteed, a situation some economists say allows the decrepit banking system to put off restructuring.

Koizumi told reporters that he had advised Financial Services Minister Hakuo Yanagisawa in the morning that he has no intention of scuttling the launch of the cap, which will limit refunds to 10 million yen per depositor in the event a bank collapses.

"Financial institutions must make utmost efforts to secure both financial soundness and the trust of depositors," Koizumi said.

Earlier in the day, Yanagisawa and Bank of Japan Gov. Masaru Hayami also ruled out postponing the introduction of the cap.

"We will seek to gain understanding by thoroughly explaining our views," Yanagisawa said in response to remarks made the previous day by a group of executives from second-tier regional banks.

The Second Association of Regional Banks had appealed to the Financial Services Agency to put off its plan to limit guaranteed refunds for liquid savings.

On April 1, the government imposed a cap of 10 million yen per bank per depositor on refunds of time deposits at banks that collapse. As expected, the change triggered a rush of depositors away from banks thought to have weak finances to larger banks thought to be stronger.

Earlier in the week, antireform lawmakers cited the risk of accelerating this trend in demanding that the government halt the limited protection plan.

Yanagisawa said he is paying close attention to deposit movements.

BOJ statistics show that a combined 36.2 trillion yen in time deposits of more than 10 million yen per account was pulled from 160 banks during the one-year period that ended on March 31.

The statistics also show depositors funneled a combined 52.1 trillion yen into demand deposit accounts of more than 10 million yen per account during the same one-year period.

Politicians have been hotly debating the launch of the second cap since February, with old guard LDP members calling for its postponement.

Hayami on Friday tried to put an end to the debate while speaking at a House of Representatives financial system committee meeting.

"From now on," he said, "it is not appropriate to hold deliberations on putting off the imposition of the refund limit. It is extremely extraordinary for the government to provide the full protection, regardless of the amounts of deposits, so we should return the situation to normal."