TOKYO (Reuters) -- Japan's image as a nation of workaholics who rarely take holidays could change if the government enacts a proposed law that would force companies to encourage people to take their vacations.

At present, heavy workloads and pressure from bosses mean less than half the average paid leave of 18 days is ever used.

The Ministry of Health, Labor and Welfare said on Monday it was considering drafting a bill that would force companies to plan employees' leave at the start of the business year and encourage them to take it.

"We feel that people are not taking enough leave. We need to discourage people from working too much so that they can balance work with family," the official said.

The government has long tried to encourage workers to take their holidays in the hope they will spend more on leisure activities and boost the economy. But just as importantly, the government wants to make it easier for workers to juggle work and family to help halt a declining birth rate.

Japan's fertility rate -- the average number of children a woman bears in her lifetime -- fell to a post-war low of 1.2888 in 2004.

The country's population shrank in the 12 months to Oct. 1, 2005, the first decline since 1945, the government said last month, fuelling concerns about a looming blow to the world's second-biggest economy from a shortage of workers to support a growing number of pensioners.

But Japan's hierarchical corporate culture can make it difficult for employees to ask for more time off than their bosses, who themselves are stuck in the office.

Some white-collar employees say taking a vacation has become harder than ever before because of tight work schedules after companies cut down on staff to save on costs in recent years.

"We have lots of holidays. But we just can't use them all because we are always short-staffed and constantly busy," said an official at a Japanese oil company.

That might mean the average Japanese "salary-man" might not be able to take leave even if companies try to force them to do so. "My boss usually pretends to take holiday but he comes to work," another company employee said. "He has lots of things to do and he has no time to take holiday, but he wants to avoid trouble with the personnel department."

Labor Ministry data shows that out of total annual leave allotted to staff, the percentage of paid leave taken in Japan fell to a record low of 46.6 percent in the year to March 2005.

The bill, which could be submitted to parliament in 2007, might also allow workers to convert their overtime hours into leave, whereas currently they are only compensated with pay.

Japan was ranked higher than the United States, Britain and Germany in the average working hours per year, according to a report by the Organization for Economic Cooperation and Development last year.