The Tokyo Sagawa scandal and the founder’s exit (1992)

Two kinds of squeeze, and where they ended

At the heart of this affair is the way a centralized group structure — head office squeezing its regional subsidiaries through compulsory remittances — pushed the man responsible on the ground into raising money outside the law. The sense of crisis about modernizing management that former president Watanabe Hiroyasu described was not, in itself, off the mark. But that the means he chose to act on it was enormous funding for politicians and organized crime is what turned the case from a failed attempt at reform into a criminal one.

Sagawa Kiyoshi’s departure drew a line under a company run on the gravitational pull of one man; the burden left behind — ¥800bn of interest-bearing debt and a destroyed reputation — was carried by the Kuriwada Eiichi regime for a long time afterwards. The structure that squeezed subsidiaries through remittances and the impulse to buy a way out through political donations look like two sides of one thing. When the distortions of centralized rule reach their limit, where is the correction to be made? That is the question the Tokyo Sagawa scandal left, and it still carries weight.