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The week following Carlos Ghosn’s arrest has seen a few more entries added to Japan’s growing list of 2018 corporate governance scandals including:

  • Olympus (7733): sued over alleged illegal payments in China.
  • Kubota (6326): CEO pay docked after company admitted to falsifying data for metal rolling components.
  • Japan Exchange (8697): CEO breached internal rules when purchasing infrastructure funds.

This clutch of fresh scandals follows a year in which Japan has seen a litany of corporate wrongdoings. The hall of shame:

  • Oct 2017: Kobe Steel (5406) admits workers tampered with product specifications over a 10 year period.
  • Nov 2017: A Toray (3402) subsidiary is found to have falsified data between 2008-2016.
  • Nov 2017: A unit of Mitsubishi Materials (5711) is found to have falsified data on aluminium products during inspection.
  • Dec 2017: Subaru (7270) is found to have falsified fuel efficiency data.
  • July 2018: Suruga Bank (8358) discovers credit application document falsification.
  • Aug 2018: TATERU (1435, Positive) is exposed as having falsified real estate loan application data.

The above list is not exhaustive but is nonetheless comprehensive. One’s gut reaction is to lament, condemn & despair in equal measure. Same old Japan, still doesn’t get it. It’s a view eloquently expressed by William Pesek in his 26th Nov piece ‘Nissan, Olympus and fixing Japan Inc. governance’.

It’s also a view apparently embraced by foreign investors who have spent the majority of 2018 unwinding stakes built up in the belief Abenomics was changing long-held norms.

But is that overly simplistic? Even by Japan’s standards the regularity of data scandals since late 2017 has been astonishing. It begs the question: why so many? And why now?

The alternative, glass half full interpretation would be that Japan is changing & this series of scandals is evidence of evolution as opposed to confirmation of being stuck in the past. Scandals that might previously have been knowingly ignored are being flushed into the public eye & dealt with, usually accompanied by change at the top.

Arguably the shift that started with Abenomics & 3 arrows, & was supplemented by the 2014 Stewardship Code & 2015 Corporate Governance Code, has reached a new phase as executives are held to account amidst greater pressure from shareholders.

Could it be a shift that ultimately results in long-term corporate improvement & higher shareholder returns? And does anybody buy that argument about corporate Japan?

The answer to the first question is a work in progress. The answer to the second question is yes: private equity. Its view? Japan is changing, for the better.