A little-known Japanese financial magazine called Facta deserves congratulations for raising questions about possibly shady financial transactions at the camera, optical and medical equipment maker Olympus.
Olympus itself has tried to shrug off the questions even as its share price fell by half and wiped US$4 billion off its value. But the real key is how Japan Inc reacts, and that will raise questions about whether Japan is a sensible place to invest.
Some of the claims concerning Olympus are large, including questionable purchases of almost US$3 billion of overpriced companies whose values were subsequently written down, payments of US$697 million, or 36 per cent of the value of the deal in question, to mysterious entities incorporated in the Cayman Islands and New York, which no longer exist, losses of up to US$1.3 billion on the deals, the sacking of the foreign chief executive and rumours that gangsters may be involved.
In most self-respecting countries, almost every aspect of the affair would have dominated the news. There would have been speculation about how long the chairman could survive, and whether the company would recover from the shock. The financial authorities would have de-listed the stock to investigate. Yet in Japan, none of this has happened, although Olympus' chairman Tsuyoshi Kikukawa has withdrawn from a forum tomorrow where he was scheduled to speak on 'Global social responsibility from Japan to the world'.
In Britain, the sacked chief executive, Michael Woodford, has asked police to investigate because one of the companies acquired, Gyrus, a maker of non-invasive surgical technologies, is based in the country and payments went through British banks. The US FBI is investigating the connections of two US-based bankers with the Gyrus deal.
In Japan, however, the financial services minister declined to comment and the Tokyo Stock Exchange has not declared Olympus 'a security under supervision', although it has asked for more information.
Only after the outcry did the company's largest shareholder, Nippon Life with about 8 per cent of Olympus' stock, press Olympus to explain itself, and the company has promised a third-party committee to investigate. Media coverage is muted.
