Oct. 17 (Bloomberg) -- Japan should change its mark-to- market accounting regulations if current rules are found to cause ``systemic risk'' in the markets, the nation's finance minister said, urging regulators to move quickly in reviewing the matter.

``I am very interested in this issue, and I want to reach a conclusion as soon as possible,'' Finance Minister Shoichi Nakagawa said at a press briefing in Tokyo today. ``We should make changes, provided it's reasonable and that something can be changed, if the current situation might cause systemic risk.''

Nakagawa's statement comes after regional Japanese lenders urged a suspension of mark-to-market rules, also called fair- value accounting, which require companies to review holdings regularly and report losses when values decline. The Securities and Exchange Commission is reviewing the practice in the U.S., and European Union leaders have endorsed easing requirements.

Critics say mark-to-market rules force firms to report losses they don't expect to incur, exacerbating the recent slump in global markets. Backers say the rule gives investors accurate information about the true value of a company's holdings.

``The halt of a fair-value accounting system can create a `black box' and hide possible losses from investors, which can make them even more nervous,'' said Nana Otsuki, a banking analyst at UBS Securities Japan Ltd. ``It can be useful as an emergency step. Yet it wouldn't have a long-term effect, as it can't improve Japanese companies' balance sheets, though it can improve investors' sentiment.''

Regional Lenders

Former executives at failed U.S. insurer American International Group Inc. told Congress this month that the rule forced the company to book unrealized losses on distressed mortgage-backed securities and credit-default swaps.

The global market rout has also hurt profitability at Japanese banks, including regional lenders, as they write down the value of holdings on their balance sheets.

``We want you to consider suspending the current mark-to- market accounting under the idiosyncratic market circumstances,'' Tadashi Ogawa, chairman of the Regional Banks Association of Japan, told Nakagawa on Oct. 15. Ogawa is also president of Bank of Yokohama Ltd., Japan's biggest regional lender by assets.

The Accounting Standards Board of Japan said yesterday it will watch discussions about mark-to-market rule changes overseas and seek input from the markets, while Financial Services Agency Commissioner Takafumi Sato said he will monitor discussions at the accounting standards board.

``If a suspension of mark-to-market accounting would make it more difficult for us to do our job, we would certainly be against it,'' Shinichi Ina, a Tokyo-based banking analyst at Credit Suisse Group AG, said in a report today. ``The Japanese response, we suspect, is partially political in the sense that officials want to do their bit for international cooperation.''

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

Last Updated: October 17, 2008 00:02 EDT