TOKYO BUREAU - Here in Tokyo, twice a week, Ko goes to cram school to prepare for the crucial entrance exam he will have to take next year. He arrives for class with a tiny knapsack packed with his crayons, lunch box and a diaper. He is, after all, only 2 years old.

Japan's super-competitive system of 'examination hell' is engulfing ever-younger children, spawning a new industry of cram schools to help the baby boomers' babies pass entrance exams for elite private kindergartens and elementary schools.

About 150 cram schools in Tokyo now cater to preschoolers, who are drilled in the test-taking strategies they need to beat the 10-to-1 odds for a slot on the kiddie fast track.

Among the lessons: Know your colors, shapes and nursery rhymes. Don't cry or whine. Sit with your hands politely resting on your thighs. And never take more than one cookie when offered the cookie jar.

Meanwhile, the cram schools also coach the babies' mothers on how to ace the equally vital parental interview.

Among the tips: Wear a conservative, navy blue suit, a white blouse, low heels and no flashy jewelry. A Chanel handbag is OK at 'liberal' kindergartens such as the famous Aoyama Gakuin, but a quiet, non-designer black bag is de rigueur at venerable institutions such as Denenchofu Futaba, whose alumni include Crown Princess Masako, wife of the future Japanese emperor.

Working mothers are frowned upon, and their children are less likely to be accepted by elite schools. Even stay-at-home moms are told to come across as homey during the interview by mentioning how much they enjoy baking special treats for their children.

'It's very difficult, but because of the way Japan is now, it cannot be helped,' said Toshiko Hayashi, whose daughter Risa, 3, was rejected by the kindergarten of her choice and will have to try again next fall.

Risa has been attending one of Tokyo's better cram schools since she was 18 months old. Tuition is $730 a month for two mornings a week.

How long will she keep attending?

'Until she passes,' her mother said firmly.

Like most Japanese trends, the baby cram schools originated in Tokyo but have spread to Osaka and smaller cities. A Tokai Bank survey conducted last year in Tokyo and Nagoya found that 26% of preschoolers were either attending cram schools or following correspondence courses at home. Their families paid an average of $124 per month.

Parents who once attended cram schools to help get into good high schools or colleges are enrolling their toddlers despite warnings from educators that intensive tutoring is unnecessary and possibly harmful for them. Some of the elite kindergartens and elementary schools also protest the advent of baby cram schools even while admitting their young alumni.

Parents call the cram schools a 'necessary evil' in Japan's 'education society,' where graduates of a handful of elite universities have for decades been seen as monopolizing the nation's best jobs, highest salaries and deepest respect.

The rigid system has loosened, with prominent educators arguing that a degree from Tokyo University, known as 'Todai,' will no longer guarantee success in the 21st century. Prime Minister Ryutaro Hashimoto has targeted education as one of six areas urgently in need of structural reform. But even Education Ministry officials think change will be slow in coming, and millions of anxious parents remain convinced that a degree from Todai is the best possible ticket to a bright future for their children.

Although dreadfully Darwinian, Japan's educational system has long been praised as a true meritocracy. Poor boys from the provinces could rise above the sons of tycoons if only they could pass the Todai entrance exam.

But now critics say the proliferation of cram schools is making it much more difficult for the children of lower-income families to break into the educational elite.

'Japan appears to be one of the most egalitarian countries in the world, but it is not,' said Todai education professor Toshiyuki Shiomi.

According to a study by Keio University professor Yoshio Higuchi, only 26% of students entering Todai in 1975 were graduates of private high schools. But by 1992, 52% came from private schools.

The wealthier the parents, the more likely they are to invest in cram schools that help their children win admission to these pricey private schools that in turn make it easier to get into the best universities.

'Parental income has a huge effect on a child's education, and through the employment system, it has a huge effect on the child's lifelong income,' Higuchi said.

Mothers of the cram-school kids said they are eager to get their kids into private schools not least because they believe those schools put a quick stop to children's bullying, the bane of the Japanese public school system.

Moreover, by getting their children into the elite private kindergartens and elementary schools that are linked to prestigious universities, the mothers hope to spare their offspring the worst of examination hell.

For example, Miki Shimamura attended the Keio schools, whose university is the Japanese equivalent of Yale. Once admitted to the Keio Yochisa elementary school, Shimamura zipped through the Keio high school and was accepted at Keio University without having to take the notoriously tough entrance exam. All that was required of him was to keep up his grades; 90% of his elementary school classmates also made it.

Now Shimamura has taken over his father's business, heading Keishinkai, an exclusive prep school for the 2- to 6-year-old set. Many of the Keishinkai parents have their hearts set on Keio.

Competition for the best kindergartens is so fierce that some parents are asked not only about their own backgrounds but about the educational and professional achievements of their parents, Shimamura said.

To pass the status sniff test, both parents must be college graduates; the father must be an executive at a large company, run his own company or be a medical doctor; and the mother must stay home to devote herself to educating her children. Although the parents must be able to pay the tuition--more than $11,000 a year for some kindergartens--nouveaux riches' kids are not welcome. 'It's a re-creation of the elite in this country,' Shimamura said.

Keishinkai offered ordinary preschool education from its founding in 1964 until about 10 years ago, when the first kindergartens began holding entrance exams. Now it specializes in helping children pass the tests, though Shimamura says that more than half his job is teaching parents to do a better job of child rearing.

Some of Shimamura's little wards are children who have been so smothered by their parents that the school's first task is to teach them how to get along with other children and how to have fun.

"Half of what the kindergarten testers look at is whether the kid can play," he said.

Reading and writing are not part of the kindergarten tests, but cognitive skills and good manners matter. Shimamura's children are taught to say "good morning" brightly and bow to their teacher, to carry tissues in their pockets and cover their noses when they sneeze.

Most of the kindergarten and elementary school testers offer the children juice and a snack and scrutinize their table manners. So Shimamura too has a bear-shaped jar of snacks. At first, the toddlers tend to stick their fists in and grab a handful, but the well-bred Japanese child is expected to take one or two and place them on a plate before eating them.

Coordination also counts in Japanese society, where clumsiness is equated with stupidity. One elementary school test required the applicant to move a pile of beans from one plate to another with chopsticks. At Shimamura's school, even the 2-year-olds are taught to use scissors (under one-to-one adult supervision), and older children are taught to fold their clothing and tie their shoelaces.

'Lately, if we leave it up to the parents, some of the kids never learn,' he said.

At Ko's cram school in a posh Tokyo suburb, one little girl spends her first day howling inconsolably over the departure of her mother. After a period of free play, the other children sit behind a tiny desk while the teacher teaches them to sing songs, draw and identify pictures of a snowman, blocks, cake, a banana and rice balls.

Ko, the son of a department store magnate, is hard at work trying to move peanuts from one bowl to another with a spoon. "No, no, no!" says the teacher as he tries to shove one intractable nut onto his spoon using his free hand.

It doesn't look like cram school, except that the teacher is grading each child on how smoothly he or she performs the peanut trick.

'The 2-year-olds don't understand they are being graded. It's the parents who feel the pressure, and so they start drilling their kids at home,' said Chizuko Nihira, a Kyoto mother of two. 'And when the kids can't do it, they [the parents] become scared at the thought of not sending their kids to cram school--even though it was the cram school that made them scared! It's a vicious cycle.'

Nihira decided against sending her son Hiroshi to one of three neighborhood cram schools, and he got into a good private school anyway. But she soon discovered that Hiroshi was the only first-grader who had not been to cram school. While he could write his name, his classmates could all write sentences. Nevertheless, he caught up within one term.

'There are some parents who send their kids to cram school because their friends all go, and there's nobody around for them to play with if they don't go,' she said.'It's sad.'