ECONOMY-JAPAN: Bankrupt Firms Learn from Yesterday’s Mistakes

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Nov 22 2002 (IPS) - After the collapse two years ago of the company he was working for, Kazuharu Takeda, 55, faced what he describes as an ”empty future” and risked being one more addition to Japan’s rising number of jobless people.

In desperation, he decided to take matters into his hands. He re-launched the bankrupt firm that he used to work in, one that manufactured metal cases for cosmetics.

”When my boss abandoned his debt-ridden company, I took over the business with my colleagues because there was nowhere else we could go. To survive, we will not repeat the mistakes of the past,” Takeda says.

Like so many other businessmen of his generation, Takeda’s boss went bankrupt after taking out easy loans at high interest rates and holding on to investments that failed to bring in any returns. In the end, the firm had a total debt of three million U.S. dollars.

Yet today, Takeda’s revival of the failed firm is one of the few success stories from the growing number of bankruptcies in Japan.

”The success rate for bankrupt companies are as low as one in a hundred,” says Akira Isayama, who heads the private Bankruptcy Prevention Cooperation organisation.

The organisation holds seminars, workshops, and lectures for small and medium-sized companies on the brink of bankruptcy, trying to get them to address management and financial problems that are among the main reasons that companies go under.

The organisation has a unique service, the new monthly ‘hansei’ (accept your mistakes) forum where former or current presidents of small and medium sized companies gather to publicly declare their faults and the lessons they learnt as a result.

”These presidents, mostly men in their fifties or sixties, begin to even weep as they repent. It is not easy to admit your mistakes in a country where the hierarchy system is deeply imbedded,” says Isayama.

Japan reported a record 20,000 bankruptcies in fiscal 2001, more than 80 percent of them involving small and medium sized companies. These firms employ 98 percent of the nation’s labour force.

Last year Teikoku Bank, the leading credit reporting company, announced that total liabilities of these companies had jumped 77 percent.

Japan has been recording a staggering number of bankruptcies since the mid-nineties, following the bursting of its over inflated economy. By 1999, Japan had 16,887 cases of bankruptcy and by 2000, 18,900 cases.

Most of these firms went under because of debt that resulted from poor investment decisions – such as their presidents’ decisions to go into bad stocks or hasty expansion projects.

Unlike countries in the United States and elsewhere, Japanese management is not controlled by company stockholders. The lack of an independent checking system has allowed companies to keep debt hidden from public scrutiny, analysts say.

Bankruptcies are also a key reason behind a surge in suicide rates among middle-aged men – 30,000 have been reported in the last three years.

Often, unemployment – the prospect that drove Takeda into action – results in broken families and adds for instance to the number of the homeless.

Unemployment in Japan currently stands at 5.4 percent or 3.56 million people, with middle aged men comprising 11.2 percent of this number.

In response, the government has tried to stem bankruptcies and resulting unemployment through special support funds and other safety net policies, but has not been able to reverse the trend.

Ippei Torrii, secretary general of the All United Workers Union, explains that more important than piecemeal official support are measures to help businessmen to face up to their problems early enough.

Seminars organised by the union now focus on promoting change and providing legal and other personal support for small and medium companies.

Torii explains that the priority is on respecting diversity and individuality and the need to move away from traditional management, where the boss demanded loyalty above everything else.

Takeda’s experience is a case in point. ”In the old system, we expected the boss to protect us. That did not happen. In contrast, today, we take decisions on an equal basis,” he says.

Takeda’s company, set up with individual investments, has a system where employees are treated as individuals with their own special needs, not a group with one goal, he adds. ”The fundamentals are that unless we each take care of ourselves, we cannot succeed,” Takeda says.

Isayama points out that another major change brought on by the acceleration of bankruptcies is the severance of traditional business ties between big and small sized companies, once a the lynchpin in Japan’s corporate world.

Usually, Japanese conglomerates founded a string of subsidiary companies that were expected to provide a stable supply of products to the parent firm. But the recession ended that system, as the popularity of outsourcing to cheaper Asian countries took over in the mid-eighties when the cost of Japanese labour was prohibitive and the mid-nineties after the economic bubble burst.

”As a result, small and medium sized companies have begun to start fending for themselves for the first time in our culture,” says Isayama. ”The reverse holds true. Twenty years ago we were proud to display our strengths. Now we are learning from our failures and we will be strong again,” he insists. (ENDS/IPS/IF/LB/SK/AAG/JS/02)

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ECONOMY-JAPAN: Bankrupt Firms Learn from Yesterday’s Mistakes

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Nov 22 2002 (IPS) - After the collapse two years ago of the company he was working for, Kazuharu Takeda, 55, faced what he describes as an “empty future” and risked being one more addition to Japan’s rising number of jobless people.
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