TOKYO, JAN. 13 -- The head of Japan's construction industry federation today rejected suggestions that Japan significantly alter the way it awards public works contracts and said foreign firms have not done well in Japan because they haven't tried hard enough, not because the rules are written to keep them out, as U.S. officials have charged.

Hajime Sako, head of Japan's politically potent Federation of Construction Contractors, maintained that Japan's construction market was "open," and said that the system for choosing contractors on public works only from a select group of designated bidders, instead of from any company interested, does not keep foreign firms out.

The lack of foreign participation in Japan's $200-billion-a-year construction market has become a major friction point in trade relations with the United States, with Congress recently adopting retaliatory legislation banning Japanese firms from further U.S. public works contracts.

Japanese Foreign Minister Sosuke Uno, in Washington with Prime Minister Noboru Takeshita this week, said that on some big projects, Japan is willing to ease rules that have effectively prevented U.S. firms from bidding on public works projects.

Construction executives, including Sako, reacted cautiously to Uno's statement today. Given the clout of the construction trades with the ruling Liberal Democratic Party, analysts here predict a major political battle over any effort to make major changes in the rules for public works contracting.

Sako, chairman of Taisei Corp., one of Japan's largest contractors, defended those rules and said that the selective bidding process is designed only to select the "most competent, responsible and reliable contractor" for public works projects. He added that it would be "totally impossible" for the federation to go along with requests that Japan abandon or significantly alter its selective bidding process.

Foreign critics have charged that it is all but impossible for non-Japanese companies to win construction contracts here because they cannot get on the list from which contracts are selected for public works. To get on the list, they must first be licensed, and the Japanese will grant a license only to companies with Japanese experience, regardless of whether they have built hundreds of dams, roads, airports and other facilities in other countries.

The Japanese construction industry is tight-knit, making it difficult for outsiders to penetrate it, and experts here say that the "dango" or "tea-house" system, in which the big companies get together before contracts are let and divvy them up among themselves, is rampant.

"If you're not part of the club, you don't know what's available, and if you don't know what's available, you can't compete, and if you can't compete you don't get a license," one western diplomat said today.

{In Washington, officials traveling with Takeshita explained that a record of experience on projects in Japan provides the needed assurances that a construction company will fullfil its commitments under a contract. In the United States, the officials noted, these assurances are taken care of by the posting of a performance bond by a construction company -- a system that does not exist in Japan.}

Sako said today that the Japanese have won many U.S. contracts because they spent years learning the ropes and building from small projects to large ones. He said U.S. firms are not willing to do the same spadework in the Japanese market. "It seems like American firms are quite hesitant to go into foreign markets unless they can raise profits in a short amount of time," he said in an appearance before Japan's Foreign Correspondents Club.

U.S. officials countered that in the United States there were no rules or cultural factors prohibiting Japanese firms from entering the marketplace and getting experience, but in Japan it is difficult for foreign firms to win even small contracts to establish a track record or even to hire Japanese subcontractors to help on a project.

Sako said the construction industry "is not against the entry of foreign firms to the Japanese market" and there is neither resistance nor any hesitation to cooperate or compete with foreign firms. But he added that "we do not think our system, compared to other countries' systems, is that unreasonable."

U.S. officials here said today that they have not pressed Japan to abandon the selective bidding system in favor of the low-bid system employed in the United States. But they do want the Japanese to take foreign experience into account in granting licenses and make their bidding procedures less "subjective," as one official put it, by providing adequate official notification of an impending contract, allowing prebid explanations of what a contracting agency is looking for and providing clear information on the specifications for any job.

Keith R. Bovetti, counselor for commercial affairs at the U.S. Embassy, said today that without such major changes in the way contracts are awarded, "our countries don't feel they can have a fair opportunity in the market place."