Bush seeks to ease restrictions on relicensing nuclear power stations and encourage investment in coal technologies. The proposals also call for tax credits to fund energy conservation and alternative fuels.

Japan's Federation of Electric Power Companies, an industry body comprising 10 key power utilities, said the new U.S. policy could help galvanise Japanese moves to build new nuclear plants in the long term, although the impact may not be immediate.

"Japan has no indigenous energy resources and needs to rely on nuclear energy," Federation chairman Hiroji Ota told a news conference. "We should take careful note that the United States, even with its abundant resources, has chosen to make this policy shift."

Japan operates 51 commercial nuclear reactors, which together supply about a third of the nation's electric power. The industry, however, has come under criticism for a series of accidents including the nation's worst ever in September 1999.

"This decision is good news for Japan's energy policy," an official at the Ministry of Economy, Trade and Industry said.

Most proponents of nuclear energy, however, doubted the U.S. policy would directly influence Japanese policymaking by encouraging construction of new plants or softening local opposition to the industry.

But they say the construction of new nuclear plants is essential if Tokyo is to fulfil a pledge made under the Kyoto pact in 1997 to cut emissions of six greenhouse gases by six percent by the 2008-2012 period from 1990 levels.

The Kyoto agreement has been rejected by the new U.S. administration.

Resource-poor Japan imports almost all its crude oil, 80 percent or more of which comes from the Middle East.

LOCAL OPPOSITION

But the industry has long seen its plans to build more reactors thwarted by pockets of fierce local opposition.

"We will continue to have to work to win the understanding of local residents for nuclear power," a spokesman for the power federation said.

The memory of Japan's worst nuclear accident in 1999, which killed two plant workers, is still raw in many peoples' minds.

Hundreds of workers, nearby residents and emergency personnel were exposed to radiation when an uncontroled nuclear chain reaction was triggered at a uranium processing plant in Tokaimura, northeast of Tokyo.

Last February, grass-roots opposition forced a power utility to drop a 37-year-old plan to build a nuclear plant in Mie prefecture in western Japan.

Citing years of conflict, outspoken Mie Governor Masayasu Kitagawa said the plan should be sent back to the drawing board.

U.S. POLICY A DISTANT DEBATE

For residents of a northern village about to vote in a referendum on the use of controversial recycled nuclear fuel at a local power plant, Bush's energy proposals seem distant and irrelevant.

"That was a decision made far away in the United States. I don't see it affecting what is taking place here," said Yukio Irisawa, 70, who leads a group in favour of using MOX."

Residents will vote on May 27 on whether Japan's largest power utility, Tokyo Electric Power Co Inc (TEPCO) , should be allowed to use the blend of uranium and plutonium recycled from spent nuclear fuel.