The government has decided that a planned state-backed industrial revitalization body will help rebuild large, heavily indebted firms in each region of Japan, government sources said Sunday.

The government will ask local financial institutions such as regional banks, which are the main creditors of such local firms, to use the body to revitalize stagnant regional economies, they said.

The body was initially designated to mainly assist in the recovery of large debt-ridden firms, including general construction contractors and distributors.

However, given deteriorating regional economies weighed down by persistent price falls, the government concluded it will also focus on helping local firms, as they are indispensable to their communities.

The body is likely to focus its support on local manufacturers even though their mainstay businesses remain relatively stable. Such manufacturers have accumulated debt as a result of excessive investments in real estate and resort development projects. during the "bubble" economic period of the late 1980s.

The government wants the Development Bank of Japan to cooperate with the body in drawing up revival plans because it has a business revival loan system and related expertise.

The body will then buy loans held by major banks and proceed with revival plans with the help of regional banks familiar with local business conditions, the sources said.