From a failed workout to civil rehabilitation — collapse with ¥1.87 trillion of debt (2000)

What the collapse revealed

Sogo’s failure was what happened when dependence on a single main bank, one-man rule, and the removal of subsidiaries from consolidation that concealed the true position all reached their limits at once. A change in accounting rules forced provisions, the cover came off, and the price of an expansion inflated by borrowing surfaced all together. The choice between an out-of-court workout and a court-supervised procedure went beyond the rescue of one company: it was the question the Japanese economy itself was facing at the time — who bears the bad debt, and how.

Rescue through debt forgiveness led by the Industrial Bank of Japan, or resolution under the eyes of the court? Public opinion, distrustful of yet another deferral, backed the legal route — though in hindsight it is not so easy to say which would have left the smaller bill for taxpayers. From this collapse Sogo went on to the rebuilding under Wada Shigeaki, to integration with Seibu Department Stores, and eventually under Seven & i. The path by which a strategy of the biggest store in town, lined up on prime ground in front of the stations, ended by merging into the retreat of the department store itself still deserves examination.