The Japanese government stepped up its efforts to combat the credit crisis on Tuesday by setting aside Y1,500bn ($16.9bn, £12bn, €13bn) in public funds to encourage banks to buy shares in cash-strapped companies.

The plan from the Ministry of Economy, Trade and Industry, which triggered a jump of nearly 5 per cent in the Nikkei share average, comes as Japan’s banks report huge losses on their corporate shareholdings because of tumbling markets.