Tokyo's stocks and the yen surged on the passing of the bills, with investors hoping for a final end to Japan's banking crisis.

The first set of reforms, eight "financial revitalisation bills," outline how Tokyo will deal with failed banks and remove the finance ministry's authority over financial affairs.

Another bill, which would prop up weak but solvent banks with taxpayers' money, is proving harder for the ruling party and opposition lawmakers to agree on.

"I hope there will be a definite plan after talks among respective parties," Obuchi said of this second bill.

Chief cabinet secretary Hiromu Nonaka said the government hoped the two sides could come to a deal themselves but Obuchi was ready to meet with opposition leaders if necessary.

"Premier Obuchi may hold talks with opposition leaders onMonday," an official for the ruling Liberal Democratic Party said. The party wants the bill enacted before the end of the parliamentary session on Friday.

Tokyo has come under intense international pressure to push ahead with reforms to clean out its 87.5 trillion yen ($750 billion) in bad bank loans.

Weeks of delay in coming to an agreement have badly hurt the country's already fragile economy. But investors felt a flush of confidence on Monday.

Tokyo's Nikkei 225 stock index surged 520.85 points, or 4.0 per cent, to hit 13,400.82 by 2 pm (0500 GMT), rebounding from Friday's close which was the lowest in nearly 13 years.

On the foreign exchange markets the yen was also higher, trading at 115.33-36 to the dollar at 2 pm (0500 GMT), up from 116.60 yen in New York and 117.18-22 yen here late Friday.

Under the laws enacted today the finance ministry, the powerful government department which has dominated post-war financial policy, will be forced to share its supervisory powers over the banking andsecurities industries with a new body.

From January 2000 the financial revitalisation committee will be responsible for managing financial crises, deciding which banks have effectively collapsed and how to deal with them.

Failed banks will either be nationalised then, transformed into a bridge bank or liquidated.

Once a bank collapses its bad loans will be sold off with the creation of a US-style resolution trust corp, and a private buyer will be sought. These buyers will be supported with taxpayers' money.

The bills also deal with the troubled Long-Term Credit Bank of Japan Ltd, which will be nationalised and sold off, possibly as early as this month.

For the second bill, the LDP proposed a revised version and is now reported to be considering a huge bailout fund for banks worth 50 trillion yen.