Japanese builders invested heavily in undeveloped properties during the nation's economic boom of the 1980s but a decade-long slump in land value has hit them hard.
"Properties held by these construction companies have a recovery value close to zero," said Okino.
"A 40 percent debt forgiveness doesn't make any sense, I always have a sense that debt forgiveness is too small," he said.
Banks have enabled otherwise insolvent builders to keep their head above water but since their capital shrank, the ratio of debt-to-capital skyrocketed to around 300 percent, according to figures by ING Barings.
The key fault is a refusal by the banks to turn off the credit tap to bad borrowers -- a trait endemic throughout the Japanese economy -- preventing the stronger companies from consolidating and restructuring the industry.
As a result, among Japan's top 50 contractors the share of orders won by the nine groups regarded as relatively healthy such as Taisei, Obayashi, Shimizu and Kajima went as low as 38 percent in 1994 before recovering to 46 percent last year, the same level as 1992.
By nature, construction is a flexible business, said Brown. "If the will is there, the way to reduce overcapacity should also be there but there is some question on whether the will is there."
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