Commentary / Japan

Western media distorts Japan

Those two favorite targets for Western moralizing about Japanese corporate corruption — Olympus (cameras) and Recruit (information) — are back in the headlines. Both typify the shallowness of much Western reporting in Japan.

Olympus is a first-rate Japanese company credited with saving millions of lives with its advanced endoscope (internal camera) technology. But like many other Japanese firms in the late 1980s it got caught up in Tokyo’s response to Washington demands that Japan inflate its economy to ease massive U.S. trade deficits.

Zaitech — literally financial skill — was the slogan of the day. It called for companies to diversify away from their main business lines and begin trading in land and securities. The result was the bubble economy, followed by the collapse of asset prices in the early 1990s. Companies like Olympus, caught up in the real estate fever of the time, had to decide what to do next.

At the time many held on to their devalued assets, believing Tokyo’s assurances that a soft landing for the economy was on the way. Few could foresee that Tokyo’s planners would embrace the foolish austerity and supply-side policies then popular with U.S. economists. Before long Japan had sunk into the deflationary swamp where it has stayed for the past two decades.

At first Olympus, like many others, tried to postpone declaring losses by using the then-legitimate accounting technique tobashi. But then the Western-influenced mark-to-market economic purists moved in and tobashi was declared illegal. Sure enough, this saw another wave of asset price collapses and company bankruptcies.

Olympus now faced another dilemma; Tokyo had begun jailing directors who had tried to save their companies by continuing to cover up asset losses. It had to get its losses off its books. But as a traditional camera company it knew little about the skilled accounting techniques needed. It tried to muddle through and inevitably fell into the clutches of cover-up charlatans. And as its problems deepened, it turned to a foreign executive, Michael Woodford, to serve as president in a bid to help disguise the continuing cover-up.

In the normal course of events Olympus would eventually have gotten rid of its impaired assets, though at much loss to itself. But Woodford seems to have decided early on that his mission in life was to expose the company’s amateurish accounting moves as evil corruption.

He was sacked on the grounds he did not understand Japan — a reasonable response to his seeming inability to realize the dilemma his company had faced and the role he was expected to play. But for our Western media vultures it was fresh meat — a shining example of a foreigner being persecuted for trying bravely to clean up Japan’s polluted political and corporate stables.

Woodford’s recent book “Exposure — From President to Whistleblower at Olympus” is now gaining the same kind of publicity as that given to the myth that brave Western media intervention was needed to have former Prime Minister Kakuei Tanaka removed from Japan’s corrupt political scene.

The so-called Recruit scandal of the 1980s is a yet another myth being revived as the company recently prepared to list its shares on the market. Recruit was founded in 1960 by a brilliant entrepreneur, Ezoe Hiromasa.

After he graduated from the University of Tokyo, his immediate and first venture was a broadsheet listing job opportunities for graduates. He then had the revolutionary idea of publishing magazines listing accommodations for rent or sale, thanks to which no longer did we, myself included, have to spend days scouring Tokyo’s pokey, inefficient real estate agencies simply to find somewhere to live.

He followed that with magazines listing the job vacancies, which previously job-hunters could only find through feudalistic connections. He purchased at some loss two U.S. Cray super-computers in a bid to show willingness to help ease U.S.-Japan trade frictions. He helped to organize the large-scale resort development that Japan needed to revitalize remote areas. He also pioneered the promotion of women to top executive positions in his company. In short he was exactly the kind of enlightened businessman that Japan needed then, now, and in the future.

But that was not how Japan Inc. decided to see him. For them, he was an unpredictable upstart with a lower-class background. His final and fatal move was to try to improve on Japan’s then highly corrupt system for share placements. In those pre-bubble days anyone able to receive unlisted share issues, especially those involving land, were guaranteed spectacular profits. So Japan’s securities companies would make sure those shares went to their friends — gangsters, sokaiya (corporate extortionists) and sleazy politicians especially.

Ezoe decided the shares in his new real estate subsidiary, Recruit Cosmos, would go a somewhat cleaner route — to the politicians, bureaucrats and businessmen who could or would help him with his ventures. But Japan’s giddy media, seemingly ignorant of how share placements were being made in their own country, decided that this was bribery, even though some of the recipients ended up with losses on their shares.

Ezoe had made little effort to disguise his actions. For more than a year the media had great fun digging out names of share recipients and forcing them into humiliating apology and retirement. They even decided that Ezoe’s use of backdoor funds to obtain that loss-making Cray computer was also evil.

The height of this media hysteria was the trial of Ezoe and former Cabinet secretary, Takao Fujinami, for bribery. At the time, Japan’s university education system and Ezoe’s job magazines were being thrown into chaos by the way companies tried to recruit students long before graduation. To restore some order, Ezoe had got himself appointed to an official education reform committee. And to do that, he had made contributions to Fujinami’s political funds.

Arrested for bribery, Ezoe held out for 103 days in arbitrary detention before being given a 13-year suspended sentence. He died a broken man (I knew him quite well). And while his company has survived and continues its good work, its name is constantly being dragged out by Western media as an especially egregious example of Japan’s corrupt business-political connections.

Let me suggest that if Western media need a mission, it is take a much harder look at how Japan really thinks and acts.

Gregory Clark is a former university president turned commentator on Japanese affairs, long resident in Japan. A Japanese translation of this article will appear on www.gregoryclark.net

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