TOKYO -- Japan's mammoth banks, international lending's macho money dealers of the late 1980s but the shy maidens of the past 10 months, are deep in a shake-up at home that will preoccupy them for most of the early 1990s.
The shake-up will virtually suspend the spectacular growth of international lending by Japanese banks, which swelled by 20 percent to 50 percent a year through most of the late 1980s and powered much of the world economy's expansion in those years.
Its effects already are visible in the form of huge reductions in theJapanese purchases that helped to keep interest rates under control at U.S. Treasury auctions for much of the past decade.
Farther down the road, foreign and Japanese analysts say, the effects are likely to take the form of constraints on investment in new plant and equipment in both developed and developing countries outside Japan, most of which already are feeling credit and capital pinches of their own.
That is the growing consensus among both Japanese and foreign analysts, after watching the world's biggest banks steadily rein in their lending goals for most of this year.
"We expect that Japanese banks will be forced to concentrate on theirhome market for the next three years, and that growth of Japanese bank lending in overseas markets will be between zero and 1 percent annually," Linda Daquil, senior analyst for UBS Phillips & Drew International, Inc., said recently.
A combination of new international rules and new economic conditions will prompt Japan's strongest banks to apply some of their resources to rescue operations for smaller and weaker competitors, mainly in the form of mergers, Ms. Daquil and other analysts say.
At the same time, the big banks will redesign both their portfolios and their operating strategies, the analysts think.
"The Japanese banks that survive will be much stronger after the shakeout," Ms. Daquil said. "We expect them to return to the international market as even more powerful competitors by, say, 1995. But they're going to be very busy restructuring and consolidating at home for the next few years."
Behind the restructuring lie two powerful dilemmas:
* Capitalization: The Tokyo Stock Exchange's two successive crashes of 1990 have deeply eroded the stock-heavy capital bases of Japan's 12 giant city banks, yet new international rules require that Japanese banks bring their historically skimpy capitalization up to world standards by March 1993. Now real estate prices, which back loans of many banks, are sagging, though no one knows how much they might drop.
* Profitability: The stock crashes effectively wiped out the lucrative stock sales that enabled Japanese banks to show profits even while operating at lending margins far thinner than other countries' banks could manage.
Ms. Daquil estimated that 32 percent of the 1989 profits recorded by Japan's 12 biggest banks came not from lending or fees but from profitable sales of stock holdings into the then-booming Tokyo exchange. Yet rising capital requirements will force the banks to improve profits dramatically to attract investors.
No one is predicting calamity in Japan on the scale of the U.S. savings and loan disaster, or even on the scale now being faced by big U.S. commercial banks.
Ms. Daquil said UBS Phillips & Drew staff members think the contraction in real estate values will be on the order of 5 percent a year for each of the next two years, a level she thinks Japanese banks can cope with.
Japan's deposit-insurance fund has never paid a yen, mainly because the Ministry of Finance finds ways to prevent outright collapse of institutions.
"Bank failures here will take the form of mergers and rescue loans," Ms. Daquil told the Foreign Correspondents' Club of Japan during a luncheon appearance.
But, because Japan's institutions account for 41 percent of the assets held by the world's top 100 banks, the effects of even a controlled and successful restructuring may well be felt in financial markets and board rooms far from Japan.
Strategies that led Japanese banks to easy profits for most of the 1980s will no longer work, analysts say.
"To deal with rapidly rising operating costs -- salaries, for example -- and the need to computerize, Japanese banks have relied on rapid expansion," Ms. Daquil said. "The requirement to increase capital ratios to 8 percent of outstanding loans, combined with the shrinkage of capital in the TSE crash, means that strategy won't work any more."
Return on an investors holdings in Japanese banks will be down about 40 percent in the current fiscal year, the worst decline in a decade, Ms. Daquil said.
It took three years to regain previous profitability levels after a similar drop in 1979, and Ms. Daquil estimated that it might take substantially longer this time.
At the same time, pressure for higher profits is likely to increase, she said.