TOKYO (AP) -- Japan's business leaders said Tuesday the U.S. financial crisis has shown the shortcomings of America's freewheeling approach to business, but defended the end of this nation's tradition of lifetime employment as needed to keep up with global changes.

The credit crisis and global economic slump have battered export-reliant Japanese companies, throwing thousands of people out of work. The sudden surge in the numbers of jobless has grabbed nationwide attention because major companies in Japan have long had a reputation for promising jobs for life.

Much of the recent criticism has centered on the widespread use in recent years of temporary workers, who have been the first to be fired in the downturn. The government estimates 85,000 temporary workers will have lost their jobs by the end of March.

The executives at Tuesday's annual New Year's gathering were deluged with questions about layoffs. And in a sign of the unfolding social turmoil, a group of workers held a protest rally outside the Tokyo hotel, where the festivities were held.

Fujio Mitarai, who heads Keidanren, a powerful business lobby, said the government must do more to protect the unemployed, and pass legislation including a stimulus package to get the economy back on track.

"Companies need to work toward ensuring employment," he said. "Companies need to work with the government."

Mitarai, also chief executive at Japanese electronics maker Canon Inc., said he was disenchanted with the U.S. financial industry. He blamed the freewheeling approach to selling risky products like derivatives for the global woes.

"It is definitely true that the free-market-style management has failed," he told reporters.

The full extent of risky lending by financial institutions in the U.S and elsewhere was exposed by the meltdown last year of America's overextended housing market. Credit markets froze as banks, laden with billions of dollars of bad mortgages and derivatives based on that toxic debt, refused to lend to each other -- triggering a worldwide economic downturn.

Tadashi Okamura, chairman of the Japan and Tokyo Chambers of Commerce and Industry, echoed similar feelings of disappointment about the apparent excesses of U.S. business practices.

"U.S. style management has gone bankrupt," he said.

Instead of depending on overseas demand, companies must create new kinds of jobs with environmentally friendly businesses, but they also need a flexible work force, Okamura said.

Masamitsu Sakurai, chairman of Keizai Doyukai, which groups executives at major companies, defended the use of temporary workers.

"Temporary jobs make for a meaningful system for both workers and employees," he said. "The issue of temporary workers being thrown out has become critical because the downturn has come so suddenly."