In a desperate bid to break the deadlock over financial stabilization bills, the government announced Friday a major turnabout in its handling of the ailing Long-Term Credit Bank of Japan.

Chief Cabinet Secretary Hiromu Nonaka said the government will no longer support the LTCB's plan to give up claims on loans to its three nonbank affiliates, shifting from an earlier stance to assist its planned merger with Sumitomo Trust & Banking Co.

The handling of the LTCB has been a major stumbling block in the ongoing negotiations over the financial stabilization bills between the ruling Liberal Democratic Party and the opposition camp.

In a restructuring plan announced last month, the LTCB said it will give up claims on a total of 520 billion yen in loans to the three nonbank affiliates -- Japan Leasing Corp., Nippon Landic Co. and Nippon Enterprise Development Corp.

Up until now, the government and the LDP had insisted that the LTCB's restructuring plan, including disclaimers on loans to its nonbank affiliates, must be fully carried out in order to facilitate a smooth merger with Sumitomo Trust. In addition, the government had been saying that it was ready to use public money to cover losses stemming from the forgiven claims.

However, Nonaka said the government now believes it is impossible to seek public support for the plan since it would force a greater burden on taxpayers. The government's chief spokesman also acknowledged the LDP's foot-dragging in the negotiations and urged the ruling party to come up with viable revision proposals to opposition-proposed financial bills.

Despite their Sept. 18 compromise agreement on major points of contention, including the LTCB issue, the LDP and two opposition parties -- the Democratic Party of Japan and the Heiwa-Kaikaku parliamentary group -- have been unable to seal the deal.