The Defense Department has paid more than $28 million in severance pay to 141 Japanese workers -- an average of almost $200,000 each -- because their banking work for U.S. military personnel was ended.

John Barber, a civilian employe in the Pentagon comptroller's office, told a House Armed Services subcommittee that the severance payments were in accord with the Japanese tradition that workers there are guaranteed lifetime employment.

Lee Middleton, an assistant vice president of American Express Bank Limited in New York, one of two U.S. banks that employed the workers, said Wednesday that the payments were "in keeping with market practices in Japan."

But Rep. John R. Kasich (R-Ohio) took a different view, terming the payments "insane" and excessive and saying he would soon introduce legislation to ban such a practice.

Rep. Bill Nichols (D-Ala.) wondered aloud if the payments wouldn't have a hard time playing in Peoria.

The payments were disclosed at a subcommittee hearing Tuesday when Barber and Army Brig. Gen. R.J. Mallion asked for authority to transfer $12.3 million in other Army funds to the account from which the Army made its 50 percent share of the payments. The subcommittee refused. Bruce Cuthbertson, Kasich's press secretary, said the Air Force and Navy have not requested similar transfers to meet their share of the payments.

The payments went to the Japanese employes after Chase Manhattan Bank and American Express Bank Limited lost a contract they had with the Pentagon to supply banking services to American military personnel in Japan, the subcommittee was told. The banks had held the contract since 1978.

The Fort Sam Houston Bank of San Antonio, which now has the banking contract, employs Americans, most of whom are dependents of U.S. military personnel, avoiding the need for severance pay, Cuthbertson said.

The amount of the severance payments was based on the age and years of service of the Japanese employes, he said. According to testimony before the subcommittee, they had been earning from $60,000 to $75,000 annually.