The ruling Liberal Democrat Party won the backing of some of the smaller opposition parties for its plan to buy up the stock of failing banks.

The small New Peace Party said it would pool its votes with those of the government to ensure that legislation was through both Upper and Lower Houses of the Diet by the end of next week, when the session is scheduled to end.

Chikara Sakaguchi, deputy leader of New Peace, said: "We realised we should hurry, although it doesn't mean we can pass any bill no matter what its content."

And the LDP vowed to push the bill's passage. A spokesman said that "we would like it to pass as soon as possible."

The government has been trying to reform the banking sector since spring, when problems emerged at one of Japan's major banks, the Long-Term Credit Bank of Japan.

Recapitalise the banks

Under the government plan, the government would purchase half the stock of any bank if its ratio of capital to assets fell below 4%. The government has set aside 10 trillion yen ($76bn) to fund these purchases.

The international standard set down by the Bank of International Settlements in Switzerland says that banks need to have double that amount - 8% - of capital to be considered sound.

Japan's banks have long been a problem for its economy. The government has said that the banks have some 87.5 trillion yen ($650bn) of bad debts.

Bank of Japan officials have admitted that most of its 19 biggest banks may not meet international capital standards, although the problem has been concealed. Many banks are sitting on large losses from their stock holdings which are still valued at the price at which they originally bought them.

The main opposition party, the Democrats, has supported some of the reform process. But it balked at a government bailout of other private banks, who it believes should bear the consequences of their failure.

And it has been pushing for an independent body to take over from the Finance Ministry in dealing with the banks in trouble.

Takeover of LTCB

One of Japan's biggest banks, the Long Term Credit Bank of Japan, is likely to disappear after being nationalised by the government, under legislation approved earlier by the Lower House.

Originally the government hoped it would be taken over by one of its rivals, Sumitomo Trust - but that company balked at absorbing all the bad debts.

Sumitomo said that "the situation has changed and the conditions for a merger have dissapated."

Now the government plans to auction off the remains of LTCB to the highest bidder after taking over its bad debts.