Japan has announced it is freezing financial aid to Burma in response to the junta's detention of opposition leader Aung San Suu Kyi.
Aung San Suu Kyi has been in detention since 30 May
The move, by Burma's biggest aid donor, will intensify pressure on the military government to address the international community's concerns over the pro-democracy leader.
Tokyo's decision comes after Japan's Senior Vice Foreign Minister Tetsuro Yano failed in his efforts at dialogue with the junta on Monday.
Sanctions against the junta have already been stepped up by the European Union, and the United States is also in the process of toughening sanctions.
Aung San Suu Kyi has been in detention since 30 May, following clashes between her supporters and individuals allegedly sponsored by the government.
British Foreign Office Minister Mike O'Brien told journalists on Wednesday that he had again been refused permission to telephone her.
She is believed to be being held in a two-room hut in the notorious Insein prison outside Rangoon.
Japan gave around $17m in economic aid and technical support to Burma last year.
The BBC's correspondent in Tokyo, Quentin Sommerville, says that until now, Japanese Prime Minister Junichiro Koizumi has appeared to shy away from the sanctions favoured by the EU and the US.
If anything, strong international measures are likely to strengthen the hand of the hardliners who are opposed to talking to Aung San Suu Kyi
But on Tuesday Mr Koizumi added his voice to the calls around the world for Aung San Suu Kyi's release.
His comments followed Mr Yano's warning on Monday to Burmese intelligence chief Khin Nyunt that Tokyo could rethink its aid if Aung San Suu Kyi were not freed.
Khin Nyunt responded that he took Japan's concerns "very seriously" and would make "every effort to resolve the situation as quickly as possible," according to a Japanese Foreign Ministry statement.
The British Government is pressing the EU to further increase sanctions on Burma, but these would be eased if Aung San Suu Kyi was released and reforms carried out, Mr O'Brien said.
If these sanctions - focused on discouraging investment and tourism and imposing restrictions on contacts with the leadership - did not work, then the issue might be taken to the UN at the end of the year, he said.
Mr O'Brien added that he would also meet the main British investor in Burma, the British American Tobacco Company (BAT), next week to urge it to withdraw from the country.