Japanese stocks are sinking towards levels unseen since 1982, sending alarmed government officials scurrying to come up with some way of propping them up.

MARKETS-JAPAN-STOCKS Officials are looking at steps to support stocks after the plunge, which has taken the benchmark Nikkei to within sight of a 26-year low hit last October.

That slices into the value of huge share portfolios held by Japanese banks and erodes their capital just when the economy needs them to boost lending.

Among proposals being considered is setting up a stock-buying agency as Japan did in the mid-1960s, which follows another plan for the government to buy up to 20 trillion yen in shares from banks -- a plan currently stalled in parliament.

The latest suggestion, in a newspaper on Thursday, is for the Bank of Japan to be pushed into buying stock exchange-traded funds.