As banks have shifted their focus away from bad-loan disposal and toward revenue-boosting measures, the realignment of local financial institutions is increasingly perceived as vital to stabilizing Japan's financial system in 2004.

The government appears poised to strengthen the capital bases of regional banks; a bill expected to be sent to the ongoing Diet session would facilitate public fund injections even for financially sound banks.

The Financial Services Agency expects the new program to take effect in the summer at the earliest, with the government set to earmark 2 trillion yen for it under the state budget for fiscal 2004.