TOKYO—Troubled electronics maker Toshiba Corp. is facing a tight deadline for mapping out a restructuring plan that has been made more difficult by the ambiguous role of the Japanese government.

Sharp Corp. last week made a surprise decision to favor a takeover offer from Taiwanese electronics assembler Foxconn over a bailout by a government-led investment fund. That fund, called the Innovation Network Corp. of Japan, or INCJ, has also been talking to Toshiba executives, according to people familiar with the matter, but its inability to land the Sharp deal has made its role at Toshiba more uncertain.

Toshiba needs a speedy rescue in the wake of an accounting scandal last year and rapid deterioration of its core units. The company's share price hit an intraday low of ¥ 167 ($1.42) on Monday, the lowest level since November 1979, according to data provider CQG. Toshiba last week projected a Â¥ 710 billion loss for the year ending in March.

On Friday, Standard & Poor's downgraded Toshiba's corporate credit rating three notches deeper into junk-bond territory. The ratings agency said Toshiba's short-term borrowing has "jumped considerably" and "support from main creditor banks will remain essential to maintain liquidity."

Chief Executive Masashi Muromachi said last week he hoped to outline key parts of a restructuring plan by the end of February. The company has said it is looking to sell all or part of units making medical devices, semiconductors and "white goods" such as refrigerators and washing machines.

The Ministry of Economy, Trade and Industry believes that the de facto dissolution of Toshiba could be a good opportunity for consolidating Japanese industry and creating a smaller number of stronger players, according to people close to the matter. At one point, the ministry and INCJ, the investment fund that it oversees, envisioned combining the white-goods businesses of Toshiba and Sharp, they said.

But Foxconn's plan to take control of Sharp has likely nixed that plan, because Foxconn, also known as Hon Hai Precision Industry Co., has said it wants to keep Sharp intact. Toshiba's Mr. Muromachi said he would consider selling his company's white-goods unit to a non-Japanese company, with other Asian manufacturers considered the most likely bidders.

Within the Japanese government, opinions are divided as to whether it should take the lead in addressing Toshiba's woes. Japan's Fair Trade Commission said in late January that public funds shouldn't be involved in bailouts except as a last resort if the private sector fell short.

Citing the risk of "moral hazard," the commission said, "The incentive to improve business efficiency is weakened when those whose operations have fallen into a difficult situation anticipate that they will be able to receive public aid for revival."

Toshiba's case is more delicate because it has a sizable nuclear-power business both in Japan and overseas through its Westinghouse Electric Co. unit, making its fate in part a matter of national security for Tokyo.

Standard & Poor's said the danger of a liquidity crunch might ebb if Toshiba can bring in a good price for its medical-systems business, which makes X-ray machines and other types of scanners. Toshiba has said it plans to sell a controlling stake in the profitable business.

People familiar with the sale said it could fetch more than $3 billion. One of those people said the leading bidders include Canon Inc., Fujifilm Holdings Corp., and a joint effort by Konica Minolta Inc. and private-equity fund Permira. Canon's chief financial officer said last month the company was interested in Toshiba's medical business. Representatives of the other bidders declined to comment.

Canon, Fujifilm and Konica Minolta, once known as leaders in the Japanese camera industry, now have significant medical-imaging businesses. A deal by any of the three would keep Toshiba's technology under domestic control.

"If the buyer is purely a foreign investment fund which could make money from selling the business to outsiders, it may not make much sense for Toshiba and Japanese industry," a government official said.

Takashi Mochizuki contributed to this article.

Write to Atsuko Fukase at atsuko.fukase@wsj.com

(END) Dow Jones Newswires

February 08, 2016 06:15 ET (11:15 GMT)