International Business : SPOTLIGHT ON ASIA : Banking Upheaval Leaves Japan Cautious : Currency: The push for further reversal of the dollar has been tempered by bad-loan portfolios and the Daiwa Bank scandal.

Japan, once aggressive in its attempts to rein in the mighty yen, now seems worried about sharper falls in the currency because of mounting global market concerns about the nation’s banking system, economists said.

“There is some hesitation among policy makers about calling loudly for a further reversal [of the dollar] if the yen’s further fall reflects growing worries about Japan’s banking system,” a government economist said.

Just a month ago, Japan welcomed a commitment by the Group of Seven nations to a continued reversal of the dollar.

But its monetary authorities have turned cautious since the dollar’s recent recovery against the yen as a result of the banking problems, analysts said.

Massive bad-loan portfolios, a scandal at Osaka’s Daiwa Bank and other woes have shaken confidence in Japan’s banking industry. The latest development occurred Wednesday with a report that the Finance Ministry will press Sanwa Bank Ltd. to help write off billions of dollars in bad loans left by Kizu Credit Cooperative, the nation’s largest thrift, which collapsed in August.

Osaka officials say Sanwa Bank is partly responsible for Kizu’s failure because the big commercial bank “introduced” a number of major depositors to Kizu, which contributed to the thrift’s fivefold growth in assets up to 1992.

Also Wednesday, Finance Ministry officials said Daiwa--accused of covering up $1.1 billion in trading losses at its New York branch--will be forced to give up a large portion of its overseas loans and securities. Kyodo News Service said the bank would be ordered to give up 40% of the holdings.

U.S. authorities have ordered the bank to cease U.S. operations by the end of January, which alone will account for 15% of the international loans and securities the bank now holds, said the official.

The dollar may climb to 106 or 107 yen, but a rise above 110 yen will raise questions about whether such an exchange rate is good for the economy, according to analysts.

The dollar closed in Tokyo at about 103 yen on Wednesday.

“Depending on how the government handles the nation’s bad loan problems, an unexpected fall in the yen may occur,” said Hiroshi Yamamura, chief economist at NLI Research Institute.

“They [monetary authorities] should be concerned about potential risks of a sharp decline in the yen as a result of the worsening fears about the Japan’s bad loan problems, which may eventually have an adverse effect on the economy,” said Susumu Takahashi, senior economist at Japan Research Institute Ltd.

Mounting worries about the banking system may prompt a stock market decline and further restrain bank lending to corporations, offsetting any benefit a weaker yen would have on the economy, he said.

Economists and currency dealers said Japan’s monetary authorities are now focusing more on maintaining a stable dollar-yen rate rather than on pushing the dollar up artificially through dollar-buying intervention.

They said Bank of Japan dollar-buying intervention had slowed recently.

Tokyo dealers said the dollar will not lose ground easily, because worries about Japan’s banking system were discouraging currency traders from aggressively holding yen assets.

The dollar rose as high as 104.05 yen on Monday in Tokyo, compared to a level of about 100 yen in early October.

The goal of monetary authorities now appeared to be to promote corporate capital investment by having a stable dollar-yen rate at around current levels, analysts said.

They said a further weakening of the yen would undermine ongoing company efforts to shift production overseas to reduce costs.

Currency dealers said market concerns about Japan’s banking problems appeared to have subsided somewhat after intensifying on last week’s news that troubled Daiwa Bank had been ordered to shut down its U.S. operations.

“But although those concerns have subsided recently, the dollar may shoot up to 110 yen if any big financial problem surfaces,” said Noriyuki Takano, vice president at Chase Manhattan Bank.