JUST as Japan Inc was recovering its composure from the aftershocks of the Daiwa affair, another and potentially more damaging trading scandal has emerged to rock confidence in the country's regulatory process. Details of how Yasuo Hamanaka, or 'Mr Copper' as he was known in the international copper market, racked up losses of US$1.8 billion are vague, but the fact his breathtaking scam was carried out through Sumitomo Corp is a blow to Japan's financial stature. Sumitomo carefully cultivated a reputation for conservatism and prudence while other Japanese financial and trading institutions became laboured with mountains of debt and murky political dealings which had left the system in disrepute. It is a genuinely international Japanese house, whose name was held in the highest regard, but Mr Hamanaka has helped to change all that. The one big difference between this scandal and those that toppled Barings and left Daiwa reeling is that this was not a case of a rogue trader, remote from head office, who formulated cunning ways of avoiding detection. As all the investigations have shown, Nick Leeson in Singapore and Toshihide Iguchi in New York were remote from the direct attention of their superiors, and this distance assisted their frauds. In Sumitomo's case however, 'Mr Copper' was a high profile individual who, as this nick name would denote, courted public attention. He also worked out of the Tokyo headquarters and therefore should have been exposed to the full gaze of internal and external checks. This is clearly not the case. It appears that he ran the scam undetected for 10 years and presumably convinced his superiors and colleagues that his decade-long success was based on pure trading skill and had nothing to do with creative accountancy and manipulation. While blame lies principally with Sumitomo, attention will again turn to the role of Japan's Ministry of International Trading and Industry and the Ministry of Finance as regulatory bodies. The Daiwa scandal highlighted their inability to act as anything resembling an effective force, and the Sumitomo debacle will strengthen demands for the creation of a body, independent of the government, to oversee the conduct of finance houses. This is the very least that could be expected from a country with the economic influence of Japan and the power it therefore exerts over the direction of international markets. Yet this is most certainly not a problem confined to Japan. The offices of international financial houses, employing complex trading systems, have already shown in the United States, Germany, Britain and Sweden to be prime breeding grounds for a new breed of technologically aware criminals, known as rogue traders. The worrying questions that remain are how many other houses could stand up to a full investigation of all aspects of their trading standards and who will be the next 'Mr Copper'.