Foreign Acquisitions Are Still the Exception in Japan : Competition: Firms that are available tend to have problems, would-be investors say. Takeover fever is down too.

TOKYO —  In the heyday of Tokyo’s mercurial stock market, wildly inflated share prices seemed to put Japanese companies out of the reach of all but the most deep-pocketed investors.

That meant that Japanese corporations were virtually invulnerable to foreign takeovers, or so the argument ran.

Today, the Nikkei stock average is at about half its late 1989 peak of 38,915.87, and foreign investors have become the biggest buyers on the Tokyo Stock Exchange.

But their purchases have been largely for portfolio investments, not takeover attempts.

The reason, analysts say, is that foreigners seem to view the takeover field here as a management minefield, where the real bargains aren’t for sale and the cultural differences are daunting. In addition, the takeover fever of the 1980s has abated.

“Unlike real estate and other investments, where the cost is the up-front acquisition price, when you buy a company cheap here, you might find serious union problems or that its factories are obsolete,” said Kiyotaka Fujii, manager of mergers and acquisitions for CS First Boston in Tokyo.

“People are much more cautious.”

Lower stock prices have enticed only a handful of foreign firms to bag corporate “bargains.” Among them:

* Hasbro Inc., based in Pawtucket, R.I., announced in April that it would buy Nomura Toy Co., a small family-owned firm with annual sales of about $20 million.

* Rohn & Haas Co. of Philadelphia announced in May that it would become a majority holder in Japan Acrylic Chemical Co., a 30-year-old joint venture.

* G. D. Searle & Co. of Skokie, Ill., announced in September an agreement to buy a 12.25% stake in Hokuriku Seiyaku Co., a pharmaceutical company, making it the largest single shareholder.

Despite a traditional allergy to foreign takeovers, Japanese firms have gradually become more open to the idea, partly because finance costs have risen with interest rates. Banks, embroiled in their own problems, have become much more tightfisted.

Harvard Business School Professor Dennis J. Encarnation says a key to regaining U.S. competitiveness lies in taking advantage of such opportunities to gain control of sales networks to market exports.

“It seems to be the right time to buy in Japan,” he said. “We ought to take the example of the Japanese and invest during times of recession.”

Hasbro said Nomura Toy gave it the distribution network it needed to compete with Toys R Us, which has opened several giant stores in Japan.

But Fujii, of CS First Boston, says most foreigners have remained wary of buying stakes in firms that they are unsure will pay off.

Foreign demand for Japanese stocks, meanwhile, has begun to taper off with a slew of discouraging corporate results for the fiscal year that ended March 31. The yen’s strength against the dollar and other major currencies also make Tokyo investments relatively more expensive.