Cleaning up after financial engineering: Toriumi’s early restructuring (1992)

Between diagnosis and treatment

The heart of this judgment lies in Toriumi correctly naming Marubeni’s weakness. His diagnosis — that the company must stop dressing up bad results by pushing them into the future, and should instead bring its unrealized losses into the open and share a sense of crisis — hit the mark. But what he could actually cut into stayed within easy reach: liquidating low-efficiency subsidiaries and merging loss-making units with profitable ones. Inferior to its higher-ranked rivals in both financial strength and earning power, Marubeni could not bring itself to the bold step of taking its unrealized losses as losses all at once, and it left the painful core for later. However sharp the diagnosis, without the stamina to withstand it the treatment cannot keep pace.

Deferring the unrealized losses the bubble had produced in small doses, rather than settling them in one stroke, was not Marubeni’s story alone but the shared shape of the Japanese firms of the “lost decade” that put off fixing their losses. From the early restructuring Toriumi began in 1992, through 1998 when the delay surfaced as a gap with rivals, to 2002 when it dealt with its bad assets in earnest, Marubeni spent ten years on the same problem. Can a company summon the resolve to book the losses and the stamina to withstand them at the same time? Lacking either of the two demanded at the entrance to a crisis, even a sharp diagnosis ends as an empty promise. The 1992 cleanup quietly shows the weight of that sequence.