After what most observers have derided as a lacklustre visit to Japan by US President George W Bush, the focus of attention has shifted to media reports of an impending bank bailout.

The Nihon Keizai Shimbun, whose official sources are generally seen as reliable, said that Bank of Japan Governor Masaru Hayami has been increasing pressure on the government to act.

The paper reported a meeting on Tuesday evening in which Mr Hayami urged Prime Minister Junichiro Koizumi to inject up to 10 trillion yen ($75bn; £52bn) into the banking system.

He also espoused further relaxation of the bank's monetary policy beyond its current ultra-loose status.

The government's main spokesman Yasuo Fukuda, also present at the talks, played down their content.

Burden

But recent heavy falls on the stock markets for banking stocks, driven by worries that the reform effort is running out of steam, may be concentrating official minds.

Japan's banks are enmired in bad debts which estimates pin at anything from 50 to 200 trillion yen.

In April, the government will stop guaranteeing deposits across the board, and observers fear a further run on the banks as savers pull out their funds.

The debt burden means lending is at rock-bottom levels, while the government cannot be of much assistance because of its own ballooning indebtedness.

And the ongoing deflation as prices fall and consumer spending remains sluggish is making matters worse.

The government is set to release its anti-deflation policy at the end of February.

Mixed messages

Still, in some ways the Nikkei's report adds to the confusion shrouding the question of how to deal with banks' bad debts.

Recent statements by ministers have suggested that a bailout is still no more than a last-ditch option.

But the worries persist, and Mr Bush's visit has done little to assuage them.

The government had hoped that the visit would help to shore up Mr Koizumi's popularity, plummeting after he sacked his well-liked foreign minister, Makiko Tanaka.

Ms Tanaka's outspoken campaign against officials' and fellow politicians' obstruction of reform was a hit with the voters, who now seem to fear that Mr Koizumi's resolve to fight for change after 10 years of stagnation is weakening.

But in the end Mr Bush uttered little more than platitudes on economic reform, while Mr Koizumi's failure to say anything significant about the US's inclusion of North Korea in its "axis of evil" made him seem weak too.

And Mr Bush's legendary tendency to say the wrong thing - in this case to suggest that yen devaluation, rather than economic deflation, had been on the agenda of the talks - further devalued the visit.