The accounting fraud and the appeal to the state revitalization fund (2004)

What the limits of a one-legged business finally asked

Kanebo’s entry into the Industrial Revitalization Corporation was the consequence of a diversification that kept filling the chronic deficits of the textile business with the profits of cosmetics; it can be read as a management decision in which what gave way was less the cash position than years of accounting practice. That Hoashi Takashi raised the banner of “clearing out big-company disease” in 1998 and yet the padding through deferred tax assets continued under his own regime tells us that changing a single executive was not enough to sever an accounting habit soaked into the company. That the private-sector solution — selling to Kao — collapsed at the eleventh hour under union opposition and infighting among the management also reflects the fragility of this company’s governance.

The decision to grant support was equally the beginning of a choice that prioritised the recoverability of individual businesses over the survival of Kanebo as a corporate body. The survey finding that 77% of the public opposed the rescue shows how widely scepticism about bailouts with public money had already taken root in society. From this decision onward, a long liquidation story began to move — the full accounting of the fraud, the criminal liability of the audit firm, and the conflict between the old management and the new regime.