Japanese policymakers drew closerrtoday to an agreement on measures to remove two longstanding obstacles to an economic recovery - banks’ mountainous bad loans and stock market weakness.

I’hc niling coalition government is expected to finalise by Wednesday a package centering on steps to help banks dispose of their non-performing loans and a special fund to absorb sales of shares held by banks.

While the deadline was self-imposed and officials have been reluctant to guarantee it would be met. at stake is the credibility of political and financial leaders who have been unable to pull the nation out of economic doldrums for a decade.

One key point of contention has been whether taxpay ^ks money should be used by a preposed fund to buy shares from hanks.

Fhe Financial Services Agency (I SA), Japan's financial regulator, had been reluctant to channel public funds into the body, saying government intervention in the market should be as limited as possible. But a member of (he coalition panel studying the issue said the gap was narrowing.

“The ISA seemed to haw leaned closer toward us, although (here are still some differences he told reporters.