JAPAN SLOW TO DETECT ROGUE TRADERS : ANALYSTS SAY CULTURE FROWNS ON INVESTIGATING, EXPOSING FOUL-UPS.

Byline: Sheryl WuDunn The New York Times

In the past several years, at least five Japanese companies have suffered huge losses from trading complex financial instruments, the most recent being Sumitomo Corp., which disclosed last week that a single copper trader had cost it $1.8 billion.

The latest stunning loss inevitably raised concerns about what other potential time bombs might be lying around on the balance sheets of Japanese companies. And amid the gleaming office towers in Tokyo, many people are asking: Why Japan?

Among the answers they hear are that Japan's regulatory mechanisms have not kept pace with the country's extraordinary economic growth and that Japanese values tend to discourage investigatory disclosures.

``It's the Japanese mentality, the bureaucratic system that places more importance on harmony rather than reality,'' suggested Masao Miyamoto, a social psychologist and author of a best-selling critique of Japan called ``Straitjacket Society.''

It's not so much that the Japanese are likely to make trading errors, he argues, but that they're less likely to uncover them until great damage has been done. And that happens, Miyamoto says, because institutions do not try to ferret out errors or rogue trading.

``If mistakes come out, if the group recognizes that the playing out of reality jeopardizes group harmony, they try to put a lid on it,'' Miyamoto adds.

While societal factors may play a significant role in the way corporations operate here, some experts say the numerous and staggering losses are an offshoot of the decades of phenomenal economic growth in Japan since the end of World War II.

That growth built upon an archaic structure of regulations, business customs, codes of protection and weak controls that did not change sufficiently as the country's postwar economy began to bloom.

Some management consultants, scholars and executives say that while traders register losses everywhere in the world, in Japan accounting practices are outdated, risk-management systems are often vague, and auditing and control systems are not always strictly enforced.

Two huge losses have come to light in the past nine months. Toshihide Iguchi, a bond trader at the New York offices of Daiwa Bank, covered up $1.1 billion in losses absorbed over 11 years. As a result, Daiwa, one of the world's largest banks, was forced by regulators to get out of the banking business in the United States.

And now Yasuo Hamanaka, a copper trader at Sumitomo, is accused of hiding losses of $1.8 billion from his superiors for a decade.

Many business people suggest that Japan's opaque and rudimentary accounting system does not exert enough discipline in bookkeeping. Assets, for example, are stated at their acquisition price rather than at their market value, as in the West - no matter how long ago they were purchased or how much their value has increased.