Kazuo Ueda, a Tokyo University professor until he was named to the monetary policy-setting committee this month, told Reuters Television a recession would have been likely without the 16.65 trillion yen package, but that now the BOJ must wait and see what will happen to the economy.

Japan's top financial diplomat Eisuke Sakakibara, however, forcefully repeated that he believes the package will surely lift the economy within six to nine months, the long-pummelled yen may well turn up even before that and that no major Japanese banks will go bust "for the foreseeable future".

Sakakibara, also speaking to Reuters Television, requested the interview to "clarify" remarks he made on Friday, in which he had said the yen would rebound "somewhere over the next six to nine months" and that some bank failureswere "probably unavoidable".

The BOJ's Ueda, asked if he thought Japan was on the brink of a recession, said: "I'm Inclined to say yes. And because of a very large fiscal package announced Friday last week, we will have to wait and see. Without the package, there was a very good chance of the economy going into a recession."

The stock market was in a less patient mood, with Tokyo shares sliding more than two per cent, largely on disappointment with Friday's package.

Ueda said he would favour a cut in Japan's official discount rate if the economy slipped into a "serious recession", although he noted there was not much room for cutting the discount rate, which has sat at a record low 0.5 per cent since late 1995.