Parking discretionary-account losses, and moving them off balance sheet through unconsolidated subsidiaries (1991)

A promise made to hold its rank, made larger than the firm

Yamaichi promised returns beyond what it could actually earn, for the reason that it could not afford to fall behind the other three on assets under management. The yield guarantee itself was a habit that had spread across the industry; it was not this firm’s invention. The divergence came at the point when markets broke and the promises could not be kept. When ¥45.6 billion of compensation came to light in 1991, the industry was handed one chance to settle up. Choosing not to empty the drawer then, and instead moving the remainder from outside the fiscal-year end to outside consolidation, is the choice that came back six years later as ¥264.8 billion.

Yet folding this into a story of concealment by a handful of executives misses something. The Ministry of Finance knew of the parking from 1991 and did not move in; the internal investigation report even records testimony that a bureau chief urged an early resolution. Inside the firm, a vice-president who argued for putting every loss on the books was transferred to an affiliate. Where a personnel practice of shipping dissenters out to the branches and the affiliates met a supervisor’s willingness to look away, the result was a state in which only a few people could see the whole thing at all.