TOKYO - Japanese banks this week were expected to follow low the lead of Sanwa Bank Ltd., which announced on Friday a 0.2 percentage point cut in its short-term prime rate, to 4.55%, effective Wednesday.

Sanwa's reduction came amid pressure from government and Bank of Japan officials. But its small size - less than the customary minimum of 25 basis points - was seen as a signal that the bankers want to see a steeper discount rate cut.

"Banks have decided to cut rates, and now it's the [central bank's] turn," said Akiyoshi Takumori, money market economist at Sakura Bank.

"I don't see the size of the prime rate cut as large enough to quell industrial pressure for lower interest rates, and the Ministry of International Trade and Industry is likely to represent them to ask for further credit easing."

A ministry survey of 148 companies, conducted around Nov. 20, found 81% believed that he discount rate should be cut from the current 3.5%

"What they really want is lower bank lending rates, rather than a discount rate cut," a trade ministry official said.

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