"In the October-December quarter, we, Nippon Steel, are accelerating production cuts," said Yutaka Hokura, Nippon's general manager of the stainless steel marketing division.

"We plan a production cut of more than 20 per cent compared with the previous July-September quarter. Compared with the January-March quarter, it will be down nearly 45 percent," the senior official told Reuters in an interview.

Nippon Steel usually produces 450,000 to 500,000 tonnes of stainless steel a year, accounting for slightly more than 20 per cent of Japan's total output of the metal. The move follows cuts of 23-24 per cent in the April-June and July-September quarters compared with the first quarter.

The company started to wind down operations from the second quarter in an attempt to draw down inventories, which have grown due to poordemand in Japan and other parts of Asia.

"It's difficult to say how long we are to continue such drastic production cuts," Hokura said. "But if things go well, we'll see falls in inventories in the first quarter next year..., which should lead to higher prices in the April-June quarter."

Despite industry-wide production cuts in Japan, the world's largest stainless steel producer, Hokura estimated that domestic stocks remained high at the equivalent of more than two months of domestic consumption since the beginning of this year.

He said Nippon Steel hoped to trim inventories to levels of about 1.8 months' worth of domestic consumption by the end of January -- closer to an ideal level of around 1.7 months' worth of consumption -- as long as the economic recession did not further slice domestic demand which is currently sliding at a pace of about 25 per cent year-on-year.

Traders said the wholesale price for the domestic benchmark stainless steel sheet now stood at 220 yen per kg, down sharply from the1997 average of 268.5 yen per kg. Hokura said Nippon Steel had raised its stainless steel offer prices by $100 per tonne from December shipments to other Asian countries after cut-throat competition brought down prices to below production costs.

"We're hoping others will follow suit when we raise prices by $100 (per tonne)," he said. "This is a kind of a gamble... Yet we have to take action to put an end to these hopelessly low prices."

Reflecting a stainless steel supply glut, following the outbreak of Asia's economic crisis, the benchmark SUS 304 cold rolled coil was now trading at around $1,050 per tonne, compared with well above $1,600 late last year, traders said.

Asked about exports to the United States, Hiroshi Suetsugu, managing director of Nippon Steel's stainless steel division, said: "Our exports to the United States are currently zero. There're some users there who are seriously short of supplies."

In July, the US International Trade Commission (ITC) agreed to press ahead with a probe intoallegations that stainless steel producers in eight nations, including Japan, Taiwan and South Korea, were dumping steel products in the US market.

Many stainless steel makers, including those in Japan, had earlier this year diverted exports to the United States to make up for slack sales in Asia due to the region's financial crisis.

Suetsugu said: "We're very unhappy that people think we, Nippon Steel, have done the same. Where exports to the United States are concerned, we're the prize student. We've not inflicted any damage to the US market."

Nippon Steel did not raise exports to the United States and its US sales were confined to special items mainly used for manufacturing automotive mufflers that US rivals no longer produced, he said.

"We're asking for the exclusion of such special stainless steel sheets or surface-treated sheets (from likely anti-dumping duties) as they are not injuring (US suppliers). Otherwise it (anti-dumping duties) would only hurt US users and consumers," Suetsugu added.