The taxpayer-funded Innovation Network Corp's plan may include an offer of more than 150 billion yen in return for a controlling stake in Renesas, the two sources familiar with the discussion said on condition they not be identified.

The offer may be delivered to Renesas's shareholders, NEC Corp, Hitachi Ltd and Mitsubishi Electric Corp next month, the Nikkei business daily reported earlier. The group wants to acquire a majority stake in Renesas before the end of the year, the Nikkei said.

A spokesman for Toyota declined to comment on the report. Renesas in a statement said it had not released the information.

Officials at the three owners, who asked not to be identified, said they were unaware of the bid. One source at a financial firm said the plan that counters KKR could take several months to devise.

Joining Toyota and the government fund will be Panasonic Corp, Nissan Motor Co Honda Motor Co, Canon Inc, Fanuc Corp and auto parts makers Denso Corp and Keihin Corp, the Nikkei reported.

The group may also invite German industrial group Bosch GmbH and other foreign firms to join it, the Nikkei added.

KKR is also in talks to buy control of Renesas, which would be its largest investment in Japan, sources told Reuters last month. That deal would give KKR more than 50 percent of cash-strapped Renesas, and could speed the pace of its restructuring in the face of sinking prices and aggressive overseas rivals.

Renesas, the world's leading manufacturer of microcontroller chips used in cars, is laying off 12 percent of its workforce and plans to sell or consolidate half of its domestic plants.

It would be among the top 10 biggest private equity investments into the world's third largest economy. Run by cousins and private equity pioneers Henry Kravis and George Roberts, KKR has operated in Asia since 2006. Its only purchase in Japan to date is the 2010 acquisition of recruitment services company Intelligence from Usen Corp for $357 million.

KKR's bid is the second this year in Japan by a foreign private equity firm in a Japanese chipmaker, after China's Hony Capital and U.S. buyout fund TPG Capital teamed up to bid for Elpida Memory Inc.

Elpida, Japan's last remaining player in the dynamic random access memory (DRAM) market, is now in talks to be bought by U.S. rival Micron Technology Inc. ($1 = 78.1600 Japanese yen)

(Reporting by Emi Emoto, Maki Shiraki, Reiji Murai, Taro Fuse and Yoko Kubota; writing by Tim Kelly; Editing by Ron Popeski)

• A Permanent Economic Emergency