The University of Tokyo and two other national universities were chosen as candidates to be designated as world-class research institutes eligible for substantial backing from a government fund, sources familiar with the matter said Tuesday.

A panel of education experts under the Education, Culture, Sports, Science and Technology Ministry also selected Tohoku University and Kyoto University from 10 applicants seeking recognition as "Universities for International Research Excellence." The decision will be finalized in the fall after on-site inspections.

If chosen, the schools would be eligible for grants paid out of profits generated from a ¥10 trillion ($70 billion) fund established by the government to bring Japanese institutions up to par with the world's top universities.

The government is planning to raise ¥300 billion every year to provide tens of billions of yen in support to each of the designated universities annually from as early as fiscal 2024 for up to 25 years.

Among the unsuccessful applicants were the University of Tsukuba, the Tokyo University of Science, Waseda University, Nagoya University, Osaka University, Kyushu University and a new national university to be formed through a merger between the Tokyo Institute of Technology and the Tokyo Medical and Dental University.

The new designation system has been introduced as Japanese universities have fallen behind overseas institutions in recent years.

The University of Tokyo dropped from 35th to 39th place and Kyoto University fell from 61st to 68th on an annual ranking of the world's best universities by British magazine Times Higher Education. The two were the only Japanese institutions in the top 200.