The Japanese government is being urged by private equity firms including Bain Capital, Carlyle Group and KKR & Co. LP to minimize the role of its state-backed funds, which they said could reduce private capital opportunities and delay restructuring for troubled firms.

The Japan Private Equity Association said in a statement that the two largest-backed funds could slow the way companies are solving their problems and increase their assets if they are not controlled.

Private equity companies have been outplayed by the funds in the recent bailouts of Japan Airlines Co. and Renesas Electronics Corp.

KKR offered to buy troubled Japanese chipmaker Renesas last year but was not able to complete the deal as it was overshadowed by the offer from Japan's taxpayer-funded Innovation Network Corp. of Japan which eventually succeeded in securing two-third stake in Renesas.

The other government fund is Enterprise Turnaround Initiative Corp. of Japan which in 2010 also bailed out Japan Airlines, defeating a buyout offer from American Airlines and TPG Capital. 

The state-backed funds are capable of raising up to $37 billion invesment in Japanese firms.