A group of ruling coalition politicians is coming under fire from investors and accounting specialists for trying to suspend globally recognized corporate accounting rules as stock prices continue to tumble.

Experts have described the lawmakers' recent proposal as "a Band-Aid policy" for the sagging economy. Any backpedaling, they say, would further erode the credibility of Japanese corporations and trigger further stock market declines.

The Accounting Standards Board of Japan (ASBJ), an independent body that decides national corporate accounting rules, on Thursday will begin discussing whether its rules should be rewritten.

At issue is the mark-to-market accounting method introduced in the 2001 business year. It stipulates that companies book their stockholdings at market value -- not at the price they initially paid for the shares.

With huge shareholdings in each other, many Japanese companies have been rocked during the past 13 months as the 225-issue Nikkei average, the Tokyo Stock Exchange's main gauge, lost more than 30 percent of its value.

The politicians -- mainly Taro Aso, LDP policy chief, and Hideyuki Aizawa, another veteran LDP member -- say corporations should be allowed to book their shareholdings at the prices originally paid.

The lawmakers are planning to submit a bill to the Diet later this month to enable the change in the accounting rules. They are also proposing to delay by two years the introduction of another rule requiring firms to report a sharp decline in their fixed asset prices.

The rule is scheduled to take effect in the 2005 business year.

According to some experts, the set of proposals is aimed at rescuing Japanese banks and life insurers, which are major institutional investors in Japan and have massive stock holdings. A steep fall in the value of these holdings would severely damage their balance sheets.

That could hurt overall sentiment in the stock market, the politicians say.

Financial experts disagree.

"It's nothing but an anachronism," said Shigeharu Shiraishi, managing director of investment advisory firm SG Yamaichi Asset Management Co.

"Investors -- at home and abroad alike -- are hoping that companies will not jump at the idea."

Shiraishi said Prime Minister Junichiro Koizumi should firmly reject the proposal. So far, Koizumi has reiterated that he will await the outcome of discussions at the ASBJ, which is made up of accounting specialists.

If the proposal passes the Diet, investors would see it as another sign of Koizumi's weakening grip on leadership, and stock prices could further drop due to the market's disappointment, Shiraishi added.

There are already signs that the impact of any political intervention would be strong.

A report by the Daiwa Institute of Research earlier this month said European institutional investors involved in the Japanese stock market would sell shares of companies that decide to suspend the mark-to-market accounting rule.

"Some investors even said they would liquidate all shares (of such firms)," said Kazuhiro Yoshii, an analyst dealing with securities and financial systems at Daiwa.

Experts said the proposal would also face a barrage of criticism from ASBJ members because book-value accounting lacks transparency.

The proposal has also been introduced too late, they say, as a number of companies are preparing to release their earnings reports later this month or early next month.

Atsushi Kato, an ASBJ member and representative partner at ChuoAoyama Audit Corp., a member firm of PricewaterhouseCoopers, said even if companies are allowed to suspend the mark-to-market accounting, few would actually choose to do so.

Many firms accept that adopting the book-value accounting method would seriously damage their corporate image and inevitably cause a selloff of their shares, he said.

He also noted that even under the book-value accounting method, the firms' latent losses would be disclosed in a required footnote to accounting documents.

What's more, Kato said, firms need to pay dividends and corporate taxes based on the scale of their profits, and concealing portfolio losses would be a denial of the need to restructure.

"Anyway, suspending the mark-to-market rule would raise speculation among global investors that price volatility in Japanese companies' stockholdings is very high, which is not always true," Kato said.

"Ironically, the politicians' plan to rescue the stock market would instead turn the spotlight on the risks of Japanese firms."