But despite a plea from the government to rethink his proposal and a threat from bankers to sue, Ishihara -- a rightwing rebel whose cause is popular with voters -- looked set to present the plan to the Tokyo assembly on Wednesday.

The plan would impose a three per cent levy on big banks'gross profits for five years to help narrow the city's yawning budget deficit, but would not affect foreign institutions because their Japanese operations are not big enough to be included.

Central government authorities, politicians and bankers, who have vowed to fight the tax in the courts if need be, have been in a tizzy since early February when Ishihara announced his plan. On Tuesday, the central government said Ishihara's plan could delay banks' efforts to write-off their bad loans and hamper their repayment of hefty public fund injections made last March to help put their finances in order.

That 7.46 trillion yen ($67 billion) infusion of tax-payers'money is one reason voters are generally resentful of the banks. The government also said the tax might hurt banks'restructuring and competitiveness, adding that it raised questions of fairness because it was aimed just at banks. Katsuyuki Sugita, chairman of the Japanese Bankers association, told a news conference that banks might be forced to sue Tokyo "as a last resort" if the tax was imposed. Chief Cabinet Secretary Mikio Aoki told a news conference the government wanted Tokyo to exercise "prudence" over the tax plan, but added it would not put any more pressure on the metropolis.

Authorities admit they have no legal basis to block the tax even as they lament the damage they say it will do. On Monday, Home Affairs Minister Kosuke Hori asked Ishihara to reconsider, but domestic media said the governor was unmoved.

Key parties in the Tokyo assembly have come out in support of the plan, which has won applause from voters who perceive big banks as arrogant and pampered with political favours.

Jolted by the bank tax tempest, the ruling Liberal Democratic Party's (LDP) tax panel met on Tuesday to discuss a similar but much broader corporate tax, based on capitalisation or sales rather than profits, that would be a boon to tattered local government finances but anathema to many firms. Both the LDP tax panel and the government's tax commission have debated the topic for years to no avail, and few expect progress this year with a general election due by October.