Unable to redeem its convertible bonds, Yaohan files for reorganisation in September 1997 — the failure of a listed major retailer (1997)

What the collapse asked

Yaohan’s collapse can be read as the point at which three things reached their limits together: the very strategy of escaping the yoke of regulation by seeking a way out overseas, excessive domestic capital spending together with loans and investments into affiliates, and a disposition to defer problems. When the roughly ¥60 billion raised in the market had produced no return and the cover came off with the restated balance sheet, the price of expansion surfaced all at once as negative net worth of more than ¥90 billion. Behind chairman Wada Kazuo’s habitual line that “there is no chance where there is no risk,” one can make out the outline of a management that would not look at the risk in front of it and kept putting things off.

Clinging to the China business when repairing relations with the banks should have come first, and then handing sixteen prize stores to a competitor — improvised responses that continued to the end — cut away the shoots of recovery. The fact that even a listed major retailer can fail confronted the industry of the day with where management ends up when the control system cannot keep pace with the speed of expansion. The contemporary verdict — that the reality behind this “super-Japanese” who had soared abroad was a very Japanese habit of deferring problems — still leaves a question for companies expanding overseas in a hurry to grow.