Despite being surrounded by 1,000 heavily-armed police and troops, the rebels slipped on to the roof of the besieged Japanese ambassador's residence before dawn to hoist their own flag and hang giant anti-government banners. While Mr Fujimori fumed, Japanese government officials in Tokyo expressed pessimism about an early end to the crisis. Some analysts saw their remarks as a hint that Japan might give Mr Fujimori the green light to attack the building.
"I am not optimistic about the situation, given that the number of hostages has been reduced to a level where it is easy for the terrorists to control them," said the Japanese Prime Minister, Ryutaro Hashimoto. "The chances of achieving their [the hostages'] freedom are now worse than at any moment [since the guerrillas stormed a diplomatic cocktail party on 17 December]," added Japan's Foreign Ministry spokesman Hiroshi Hashimoto. "The situation is more serious than ever. Dialogue began before the New Year but has now reached an impasse."
It was the first official confirmation that negotiations between the Tupac Amaru rebels and Mr Fujimori's government had broken down. The government negotiator, the Education Minister, Domingo Palermo, has not visited the building for several days. Nor has Bishop Juan Luis Cipriani, a Roman Catholic cleric who previously won the release of many hostages. Even the International Red Cross delegate, Michel Minnig, stayed away from the compound on Friday for the first time since the crisis began.
In the night, rebels hoisted a huge flag of their Tupac Amaru Liberation Movement (MRTA) - Peru's national flag with their own logo in the centre. They also hung three banners. "Mr Fujimori, with arrogant declarations and without dialogue there will never be a solution," read one. "Peru of today: 13m Peruvians in extreme poverty. Where is the progress?" read another.