Such a plan would counter a 100 billion yen ($1.3 billion) bid for Renesas by private equity firm KKR, which is in talks to buy a majority stake in the world's leading manufacturer of microcontroller chips used in cars, sources told Reuters last month.

Renesas was notionally quoted at 336 yen, up nearly a third from Friday's close of 256 yen.

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, two sources familiar with the discussions told Reuters on Saturday.

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

As customers of Renesas, Toyota and other Japanese manufacturers might be persuaded to help the firm, which has struggled with sinking prices and aggressive overseas rivals, in order to secure their supply chains, an industry source told Reuters on Saturday. ($1 = 78.1600 Japanese yen)

(Reporting by Dominic Lau and James Topham; Editing by Chris Gallagher)

• A Permanent Economic Emergency