By Sandra Sugawara
Washington Post Foreign Service
Wednesday, April 1, 1998; Page C11

TOKYO, March 31—At Bic Camera, one of Japan's most popular consumer electronics chains, you can buy cameras, stereos and TV sets. Starting Wednesday you can also buy yen.

In recent days, clerks in its stores have been learning to convert dollars to yen, and brushing up on their English.

"It's difficult to predict how many people we will get" for the foreign exchange business, said Tatsuhiko Asaka, an executive with Bic Camera. "Possibly 50 or 60 customers a day, but I don't really know."

Wednesday is the official start of "Big Bang," Japan's program to deregulate its strictly controlled financial markets by 2001. Bic Camera is just one of countless companies that will jump into businesses that for decades were closed to them by law.

The aim is to open up the country to global capital, drawing in foreign banks and securities firms to transform Tokyo into a vibrant financial center to rival New York and London. At the same time, officials hope, it will strengthen Japan's many faltering financial institutions and help them stoke an economy that has been locked in stagnation for much of the '90s.

Over time, the shifts could encourage Japan's people to send abroad more of the estimated $10 trillion that they hold in personal savings and financial assets, many analysts believe.

Masaru Takagi, an economics professor at Meiji University in Tokyo, predicts that in 10 years, about 10 percent of Japan's savings will be invested overseas.

Others believe things will move more slowly. "I don't expect to see a significant change as of April 1," said Mitsuru Saito, market economist for Sanwa Bank.

Over time, Japanese may begin to shift to overseas investments, Saito said, "but capital will not just be flowing one way. It will be flowing into Japan as well as out. Particularly now -- with more foreign interest in buying Japanese real estate and companies, foreign money could flow in."

The latest steps build on changes enacted last year that made it easier for Japanese to buy mutual funds, both foreign and domestic. For instance, mutual fund companies were allowed to sell their products in banks. In December, U.S. firm Fidelity Investments set up booths in numerous banks. Analysts and bankers say sales have been slow, but Fidelity officials responded that they viewed the effort as an educational process. Fidelity is launching its own phone sales operation Wednesday.

One reason many analysts predict a gradual change is the generally conservative investment attitude of the typical Japanese. In a report issued today, the Bank of Japan found that during October and December of last year, as the Japanese stock market headed down, investments in mutual funds fell by 16 percent and stock holdings fell by 22.6 percent, while cash on hand grew by 7.9 percent.

Shozo Yamane, a 73-year-old sake brewer, said he is not interested in risky investments. He said the stock and currency markets are a game "only younger people should play. At my age, I cannot afford to make such a loss."

Investment advisers say that they have been surprised by the amount of interest from people in their twenties and thirties.

"I'm thinking of dabbling in it myself," said Hiroko Ohta, a 28-year-old reporter for the popular weekly magazine Shukan Josei, which is aimed at the twentyish crowd. The current issue strayed from its usual fare of articles on celebrity romances and modeling tips to feature a story by Ohta entitled: "Big Bang. All It Takes Is 10 Minutes to Understand."

"I'm always interested in doing something trendy, so now I am interested in mutual funds," Ohta said.

Fidelity, Merrill Lynch and other U.S. institutions have said they expect to do well in the emerging freewheeling environment. Indeed, a survey by a major Japanese institution found that a significant percentage of people said they planned to increase transactions with Citibank, while cutting their business with many Japanese banks. When asked what banks they intended to use most, Citibank ranked second, surpassed only by Bank of Tokyo-Mitsubishi.

The Big Bang phase that begins Wednesday will remove many foreign exchange controls, allowing money to flow more freely across Japan's borders. It will lift controls on commissions on securities trades of more than $385,000, to encourage more competition. It will let anyone get into the cur rency-changing business, with no license required.

If fully carried out over the coming three years, Big Bang would turn on its head many of the principles that guided Japan's postwar financial industry. For years, the government divided up the market, letting certain types of institutions do only certain types of business -- for instance, trust banks could manage pension funds, but ordinary banks could not. Countless types of simple transactions required a bureaucrat's stamp of approval.

The government maintained that this ensured order and stability in a crucial economic sector that took in savings and provided capital for export industries. Now, the prevailing view is that the protections have created weakness and dependency, while foreign banks and brokerage houses have become lean and efficient.

All over Japan, banks and finance companies are holding hundreds of billions of dollars of bad loans left from the collapse of the "bubble economy" of the 1980s. The government has been moving ahead with the changes despite concerns they will push some weak firms into collapse, saying that could be the price of future buoyancy.

Already officials have shown they are willing to let the truly sick institutions die. Yamaichi Securities Co., once Japan's largest securities house, officially closed its last offices today, four months after authorities revealed the severity of its losses.

Though officials use the term Big Bang, as if everything happens at once, they have in fact been nibbling away at many rules for years. According to Clifford J. Shaw, president of Mercury Asset Management Japan Ltd., Japanese already can buy foreign stocks, foreign mutual funds and hold foreign currency deposits in Japan, in banks such as Citibank and Sanwa Bank.

For individual investors, the major change under the new rules will be freedom to open bank accounts overseas without government approval, eliminating paperwork and hassles. Analysts here say that some Japanese will shift funds to foreign banks to take advantage of higher interest rates, but that the numbers probably will be limited because of the potential for foreign-currency losses if the value of the yen suddenly were to rise.

"It's also possible money will flow overseas to evade taxes," Inoue said.

For institutional investors, the major change will be an end to restrictions on how much domestic pension funds must invest in Japanese markets. For the past two years, the Japanese government has permitted Japanese pension funds to apply for exemptions from those restrictions on a case-by-case basis, Shaw said. So "I don't see this as being a sort of crash, bang, wallop thing, but rather a steady burn," he said.

Another reform taking effect on Wednesday will allow any company and individual to make foreign exchange transactions. News media have predicted that convenience stores and a host of other retailers would plunge into this business. But so far, no convenience store has stepped forward.

"I think most places are taking a wait-and-see attitude," said Asaka of Bic Camera, one of the few retailers with plans to try the currency business.

Special correspondent Akiko Kashiwagi contributed to this report.