But the Japan Broadcasting Corp claimed yesterday police confirmed the radical cult was making sarin, the deadly nerve gas used in the subway attack.

The national network said police would quickly identify the sect members responsible for producing the Nazi-invented gas at the sect's compound near Mount Fuji.

Daily searches at cult facilities since the attack have turned up tonnes of chemicals and equipment police say could have been used to make sarin.

But yesterday's discovery, if true, would be the first time police found the nerve gas itself, and not just its ingredients. The cult said the chemicals on its property were to make fertilisers, computer chips and other products.

Meanwhile, Japanese dailies claimed yesterday that cult leader, 48-year-old Shoko Asahara, may be suffering from a terminal illness, quoting the sect's top spokesman.

'The master's condition is quite serious. He has a heart ailment and cirrhosis of the liver. They could be fatal illnesses,' Fumihiro Joyu, the spokesman, was quoted as saying.

Yesterday, two department stores were closed and classes were suspended at several schools. Streets and trains in Tokyo's central Shinjuku district were unusually empty. Police also guarded cinemas, airports and sports stadiums.

The military's largest chemical warfare unit was also placed on alert.

In a book published last month, the cult leader prophesied that yesterday would bring a catastrophe to Tokyo worse than the Kobe earthquake in January. More than 5,500 people died in that disaster, which the sect claimed its guru predicted.

Chief government spokesman Kozo Igarashi said the fears might be baseless 'but we must be cautious about everything so that the people can be free of worry'.

Cult members warned relatives and friends a 'horrible' event might happen in Shinjuku, one of Tokyo's most popular entertainment districts.

Even people who had nothing to do with the cult were heeding news reports and staying home. Many who did venture out were nervous.

'My family told me not to come to Shinjuku,' said Kyoko Yoshida, a recent college graduate. 'But I have a job interview.' Grim-faced policemen patrolled Shinjuku station, normally the world's busiest. Their protective riot shields were propped against several walls. 'We have had a variety of calls warning something would happen,' one officer said. 'We're taking them seriously.' Tokyo hospitals were urged to stock up on nerve gas antidotes as a precaution against an attack, newspapers said. Even railway maintenance workers were pressed into security duty and patrolled the station - a vast multi-tiered maze of shops and corridors - wearing helmets and bright yellow work clothes.

'It's scary,' said Yuki Sasaki, on a visit to Tokyo from the countryside. 'It seems like Aum members could be hiding anywhere.' Some people were also reported to have refrained from drinking tap water due to a rumour that the water could be contaminated with germ or poisonous substances.

'You have to believe it [the prophecy] to a certain degree,' said Taeko Kokuda, the owner of a dry-cleaning shop in central Tokyo.

'We bought mineral water for our family just in case.' But many others appeared to be fed up with what they called the over-reaction to the rumour, mostly spread by tabloids and television shows.

'I think it's a whole lie,' said Kazuaki Horose, a 29-year-old who was on the way home from a friend's wedding.

'The media is doing too much to agitate people's fears. Everybody is just being fooled around by Aum.' Security was also tightened elsewhere in Japan, a national police agency spokesman said.

The US State Department in Washington recommended on Friday that Americans take 'prudent security precautions' while walking or travelling around Tokyo.

Evidence linking the cult to sarin has made it the target of Japan's largest police investigation ever.

Police yesterday announced the arrest of cult member Masanobu Iwao, 35, on suspicion of breaking into an electric company's laser research centre late last year. They said he worked for a jewellery company operated by the sect.

The cult is interested in laser weapons and has acquired military gear, according to news reports. Police have found materials that indicate the cult was trying to make its own guns.

A former member interviewed on television yesterday said he was involved in efforts by the cult to develop biological weapons between 1990 and 1992. The man, whose name was withheld because of fear of retaliation, told the national NTV network he helped process a mixture of toxic germs that the cult intended to spray from a sprinkler attached to a truck.

Police have arrested at least 107 cult members on a variety of charges, none directly related to the subway attack. The sect charges the police actions amount to religious oppression.

Asahara, who has been missing since the subway attack, predicts a war between Christians and Buddhists will set off World War III in 1997 and says sect followers must prepare to survive.

Aum spokesman Fumihiro Joyu said Asahara's prophecy was based on his astrology studies and that Aum posed no threat.

'Some media have improperly reported to the effect that our sect will threaten peace and order by resorting to something like sarin subway attacks,' said a statement issued by the sect yesterday.

'We will never do such a thing.'