"I'm only looking for 30m initially," whispered the anxious but determined-looking man who had just introduced himself as an internet entrepreneur in search of funds.

"I can't say much now," he said, lowering his voice and moving closer to ensure that no one else in the packed nightclub was listening. "But I have a unique idea for selling women's fashion on the web."

There are not many places in Tokyo where a scruffy journalist can be mistaken for a millionaire investor, nor many dancefloors where people would rather exchange business cards than body fluids. But these are no ordinary times for Japan and this is no ordinary event.

After years of hesitation, everybody in Japan suddenly wants a piece of the web. And Bit Style, a monthly gathering of internet entrepreneurs and venture capitalists, is where they go to get it.

In 12 months, this event - held most recently at Velfarre, Tokyo's biggest nightclub - has become the most talked-about party in town. Against a background of techno music, flashing lights and lasers, it is here where Japan Inc is becoming intimate with the internet in a coupling that could decide the nation's future.

It is a passionate but awkward embrace. Far from the cool and casual geek style of Silicon Valley, most of Japan's internet wannabes look stiff and uncomfortable out of the office. Dark suits and side partings - the traditional salaryman uniform - far outnumber jeans, trainers and ponytails.

"I sort of felt I had to wear a suit and tie," says Yoshikatsu Ezaki, a self-confessed computer otaku (geek) who names Bill Gates as his hero. "I know we have to change that way of thinking, but first impressions count. Maybe next time I'll dress more casually."

Self-conscious young entrepreneurs hang together in twos and threes apparently uncertain whether they should try to seduce or be seduced by the slick money men.

It is clumsy and uncertain, but the intensity of the spectacle - in many ways, the sight of Japan trying to re-invent itself - draws a huge crowd.

When it started 12 months ago, Bit Style attracted just 200 people - many of whom were computer geeks, returnees from America and others on the periphery of Japanese society. But 2,000 squeezed into the latest gathering, and among those who queued up for half an hour to enter were international investors and representatives from some of Japan's biggest corporations.

Despite its reputation as a technological powerhouse, Japan is a late convert to the internet. Thanks partly to sky-high connection charges, the number of Japanese internet users is low at 18.3m, or 14% of the population - less than half the proportion of users in the United States.

The culture of the internet could not be more at odds with the country's traditional social and business models. While the world wide web creates a chaos of horizontal links between consumers, Japan Inc is built on rigid group hierarchies and the pre-eminence of production.

For years, this meant that the web was associated with otaku and outsiders such as Masayoshi Son, the Korean-Japanese founder of Softbank and now the world's most powerful e-investor.

"In Japan, the internet appeals to those who have been alienated or isolated from traditional practices. They are people who have nothing to fear or lose from change," says Noriko Hama of the Mitsubishi Research Institute. "In that respect, the element of revolution is much larger in the Japanese economy than in the west."

This has made Bit Style an important stage for those seeking to lead Japan's nascent new economy. Last month Mr Son cut short a trip to Davos and spent £150,000 to charter a plane so that he could share his evangelical message with the young Bit Style crowd.

"Our age is coming," the 41-year-old told the adoring throng. "This is a period of revolutionary change. In years to come, people will say that we were the ones who transformed Japan and brought it into the information age."

But these days it is not just the geeks who are listening. Mainstream Japan is also paying attention. It has little choice, having waited in vain for most of the past 10 years for the US e-bubble to burst, while Japan's economy has been stagnating.

In a sudden conversion, corporations, public agencies and trust funds have created an ocean of capital - by some estimates as much as 750bn yen (£4.2bn) - for new internet start-ups.

The Tokyo stock exchange has hurriedly established an over-the-counter market - the oddly named Mothers - for venture companies. Two other new bourses are in the pipeline that will make it easy for technology companies to list their stocks with few questions asked.

Even the ministry of trade, which has guided Japanese industry for the past 50 years, has declared that the best way it can encourage the new economy is by non-interference. Deregulation is already starting to reap dividends in the field of internet-capable mo bile phones, where Japanese companies have taken a commanding lead.

But with a huge amount of money now chasing a small number of internet stocks, few analysts dispute that a bubble is forming.

"Not many investors know what they are doing," said Hirohiko Sasaki of Netyear Group, one of the leading lights in the Japanese e-community, and a founder of Bit Style. "They are just throwing capital at the internet, not because they love the companies, but because they want to make money."

With Bit Style now as big and frenzied as a Klondike goldrush, Mr Sasaki said the organisers have decided not to hold any more events on such a scale. "Our aim this year is to cool things down," he said.

But that is likely to prove difficult. The dot.com revolution has generated a confidence and excitement that has been all too rare in Japan during the past decade.

"Japan has been well known for improving existing technology," said Veryan Allen, an investor at the Bit Style event. "Who's to say it won't do the same with the internet?"

•The number of Japanese internet users - now 18.3m - has been growing by about 20 per cent each year, but it is expected to surge to more than 45m by 2002 because of the popularity of web-capable cellphones.

•The amount of capital available for Internet start-up firms in Japan has surged in the past year from almost nothing to between 400 billion yen to 750 billion yen (£4.2 billion) as investors, led by Softbank and Hikkari Tsushin, rush to stake a claim at the new Internet Klondike.

•Revenue from e-commerce in Japan is projected to grow from $3.2 billion last year to $66 billion in 2004, according to Andersen consulting.

Despite the recession, the value of Internet advertising has almost doubled each year to hit an estimated 20bn yen (£111m) in 1999.

•Hiroshi Mikitani - Founded Rakuten, a cybermall, in 1997. The company has since grown from 13 shops to 2,000 with 600,000 registered consumers. Preparing IPO in April that is expected to raise $100 million.

•Yoko Aoki and Kikuko Yano - Posted idea for a new Women's web site on an Internet notice board. Within a week, they had $100,000 in seed money for CafeGlobe.com.