Japanese stocks were slightly lower early morning, following yesterday's rally after a confidence boost by the government. After early trading the Nikkei average was down 60.34 points at 16,626.17.

But the government's belated interventionist policy and the finance ministry's announcement of an increase in the country's trade surpluses is maintaining confidence.

The market had rallied 3.5 per cent yesterday, following a signal from the government that it was preparing to abandon its austere fiscal policy and inject large amounts of public funds into the country's stalled economy. The Prime Minister, Mr Ryutaro Hashimoto, has instructed bureaucrats to study a proposal to issue Y10,000 billion (£51 billion) of government bonds to support the banking sector and possibly fund tax cuts.

If adopted, the plan would represent a complete U-turn in the government's fiscal stance.

One of Mr Hashimoto's main goals has been to reduce the public deficit, and he has insisted the government would not use public money to address the country's deep financial and economic problems.

The apparent change reflects growing government concern about the weakness of Japan's economy.

Mr Hashimoto is also under intense political pressure from Japan's main trading partners, in particular the US, to revive the economy by boosting domestic demand rather than relying on a resurgence of exports.

A media survey yesterday also showed that the popularity of the prime minister had slumped to its lowest level since he took office.

Meanwhile, Japan's trade surplus soared a massive 220.2 per cent in October compared with a year earlier, the Finance Ministry said.

The ministry said the surplus in the current account - the broadest measure of goods and services - climbed to 1.08 trillion yen compared with a surplus of 337.7 billion yen the previous year.