But at the same time Tokyo has given a stark warning to investors to avoid the weaker banks.

The Japanese government took control of Nippon Credit on Sunday saying the bank was insolvent and had failed to come up with a realistic recovery plan, despite protests from the bank's management.

It was only the second time Tokyo has nationalised one of its major banks. The bank's stock closed at 158 yen (1.4 dollars) on Friday but Tokyo, which said the bank was insolvent, will likely pay noting to take over the shares, analysts said.

``The government has demonstrated its new stance; no longer will it rescue failing banks,'' said Nozomu Kunishige, banking analyst at Lehman Brothers in Tokyo.

"Tokyo's stock market fell on Monday pulled down by the central bank's gloomy tankan business survey. TheNikkei 225 Stock Index dropped 1.0 per cent to close the morning at 14,256.96. On the foreign exchange markets the yen was also down, trading at 116.73-75 yen at 11 am (0200 GMT), against 116.35 yen in New York on Friday.

Many top banks have been brought to the brink of collapse by their bad loans, which have snowballed since the collapse of the bubble economy in the early 1990s.