’s stance on the Carlos Ghosn Case, at last: A boardroom coup making “thin legal soup” that might shame Japan’s “hostage justice” judicial system into reform


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Hi Blog. has been holding back on commenting on the Carlos Ghosn arrest.  A former president of Nissan and Mitsubishi, Ghosn was a hero in many circles for saving the formerly struggling Japanese automakers and making them world players again.  (Disclosure:  I’ve owned a number of Nissans, and found their quality improved over the years.)  So imagine everyone’s surprise (not the least his) when he’s returning from an overseas meeting last November and suddenly gets arrested at Haneda Airport (along with a fellow NJ associate), and thrown in the clink without trace for the standard 48 hours without charge, then a couple of ten-day periods before re-arrest and repeat.

The reason has been holding back is because, well, actually, what happened to Ghosn after arrest is not all that surprising from a jurisprudential perspective.  This could happen to anyone regardless of nationality (excepting the general denial of bail for NJ).  And I personally have to admit feeling just a shade of schadenfreude for a filthy-rich one-percenter getting taken down a peg.

Truth is, I wanted to see if he’d get the standard treatment afforded most perps in Japan — a few weeks, months, or even more than a year of disappearing while being put under constant duress until you sign a confession (aka “hostage justice“).  Plus the standard treatment given NJ under arrest — an additional presumption of a lack of human rights for foreigners.  More on all that in my book Embedded Racism, Ch. 6, “A Chinaman’s Chance in Japanese Court”. I did comment on Ghosn for The Japan Times in my annual year-end round-up Just Be Cause column (published version here, “Director’s Cut” here).

Well, Ghosn has gotten the treatment.  Except for the fact he’s been able to communicate with the media in high-profile interviews.  More on that below.  So here’s’s long-awaited comment about the Ghosn Case (from that “Director’s Cut”):


DEBITO.ORG COMMENTS:  The former CEO of Nissan and Mitsubishi motors (but remaining as CEO at Renault), Ghosn was arrested last November and indicted in December for inter alia allegedly underreporting his income for tax purposes. As of this writing, he remains in police custody for the 23-day cycles of interrogations and re-arrests, until he confesses to a crime.

This event has been well-reported elsewhere, so let’s focus on the JBC issues: Ghosn’s arrest shows how far you can fall if you’re foreign. Especially if you’re foreign.

One red flag was that the only two people arrested in this fiasco have been foreign: Ghosn and his associate, Greg Kelly. Kelly is now out on bail due to health concerns. But where are the others doing similar malfeasances? According to Reuters, Kobe Steel underreported income in 2008, 2011, and 2013, and committed data fraud for “nearly five decades.” Same with Toray and Ube Industries, Olympus, Takata, Mitsubishi Materials, Nissan, and Subaru.

Who’s been arrested? Nobody but those two foreigners.

And Japan’s judicial system has a separate track for NJ suspects, including harsher jurisprudence for NJs accused of crimes, lax jurisprudence for NJ victims of crimes, uneven language translation services, general denial of bail for NJ, an extra incarceration system for subsequent visa violations while in jail, and incarceration rates for NJs four times that for citizens. (See my book Embedded Racism, Ch. 6.)

Most indicative of separate and unequal treatment is that some of the accusations, which fall under a statute of limitations of seven years under the Companies Act, are still applicable. Prosecutors have argued that statutes do not apply to Ghosn because he spent time overseas. Apparently even the passage of time is different for foreigners, because the clock stops if they ever leave Japan!

It’s’s view that this is a boardroom coup. The Wall Street Journal has reported that Ghosn was planning to oust a rival, Hiroto Saikawa, who has since taken Ghosn’s place as CEO. A similar thing happened to at Olympus in 2011, when CEO Michael Woodford broke ranks and came clean on boardroom grift. He was fired for not understanding “Japanese culture,” since that’s the easiest thing to pin on any foreigner.

But in Woodford’s case, he was fired, not arrested and subjected to Japan’s peculiar system of “hostage justice” police detention, where detainees are denied access to basic amenities (including sleep or lawyers) for weeks at a time, and interrogated until they crack and confess, with more than 99% conviction rates.

The good news is that finally overseas media is waking up to what Japan’s Federation of Bar Associations and the UN Committee Against Torture have respectively called “a breeding ground for false charges” and “tantamount to torture.” Funny thing is, if this had happened in China, we’d have had howls much sooner about the gross violations of Ghosn’s human rights.

(Source on “statute of limitations does not apply:” “Japan’s Companies Act has a statute of limitations of seven years. Prosecutors argue this does not apply due to the amount of time Ghosn has spent outside the country.”
Other irregularities noted in the JT by Glen Fukushima:


Well, the news is now Ghosn’s case has been picked over by the media (the charges are being called “thin soup” below).  And Ghosn’s high-profile status has enabled him to get a high-profile interview with the Nikkei newspaper below (for fifteen minutes, with a five-minute extension).  Few if any other people incarcerated in this system have this much ability to draw attention and make their case to the public.

Moreover, since Ghosn’s Japanese language abilities are probably not at the level of the language in his interview, it’s reasonable to assume  the interview was in English.  In my direct experience in dealing with other incarcerated foreigners, if they talk with anyone they must do it with a guard present, and they must speak in Japanese at all times so the guard can understand what’s being said.  Ghosn’s ability to get around that rule seems to be another trapping of his privilege.

That’s a bit annoying.  But if it eventually shines light on an abuse of the Japanese judicial system in specific (i.e., uneven enforcement of the law), and shames Japan into reforming its “hostage justice” interrogation system in general, then some good may come of it.

In the end, the Ghosn Case, on top of the the Woodford Case, remain excellent reasons why foreigners shouldn’t hope to become executives in Japanese companies.  One boardroom coup later by the nativists, you could be in jail for being CEO while foreign. Debito Arudou, Ph.D.


Exclusive interview: Ghosn says ‘plot and treason’ led to arrest
Ex-Nissan chief claims rivals wanted to ‘get rid’ of him
Nikkei Asian Review, Nikkei staff writers, January 30, 2019

In his first interview since being detained on Nov.19, ousted Nissan Chairman Carlos Ghosn claimed that certain people had “distorted reality” for the purpose of “getting rid of him.”

TOKYO — Former Nissan Motor Chairman Carlos Ghosn told Nikkei in an exclusive interview Wednesday that he had “no doubt” that the charges against him were the result of “plot and treason” by Nissan executives opposed to his plan for deeper integration between Renault and its two Japanese alliance partners.

Speaking on the 10th floor of the Tokyo Detention House, dressed in a black fleece jacket and gray sweatpants, Ghosn acknowledged that “there was a plan to integrate” Renault, Nissan and Mitsubishi Motors. The plans had been discussed with Nissan President Hiroto Saikawa in September, he added.

In his first interview since being detained on Nov. 19, Ghosn claimed that he had wanted to include Mitsubishi Motors CEO Osamu Masuko in the talks, but “Saikawa wanted it one-on-one.”

Once the three automakers were more closely integrated, Ghosn wanted to ensure there would be “autonomy under one holding company,” he said, adding that this plan was in line with how he had operated the alliance in past years.

Allies of Ghosn’s have argued that some Nissan executives feared a further concentration of power under his leadership, prompting them to cooperate with Tokyo prosecutors.

Nikkei had been requesting a one-on-one interview with Ghosn since his arrest last year. The approval was granted this week.

Ghosn was allowed by the Tokyo District Court to speak with Nikkei. Media interviews with prominent business leaders in detention are extremely rare in Japan.

“We don’t have much time. Let’s get started,” Ghosn said at the beginning of the interview from behind the acrylic glass partition. As the end of the allotted 15 minutes approached, he asked the officer for “a little more” time, and was granted a five-minute extension.

The Brazilian-born tycoon has dismissed accusations that his 19-year reign at Nissan was a “dictatorship,” saying this was a narrative created by rivals who wanted to remove him. “People translated strong leadership to dictator, to distort reality” for the “purpose of getting rid of me,” he added.

Ghosn has been held without bail for more than 70 days since Tokyo prosecutors arrested him on allegations of financial misconduct.

He was charged with underreporting his salary over several years, and aggravated breach of trust for allegedly transferring to Nissan personal trading losses from foreign exchange contracts.

The breach-of-trust charges center on $14.7 million in payments to a company run by Saudi businessman Khaled al-Juffali.

He denied the accusations and claimed “the executive in charge of the region signed [the approval].”

The payment was made from Ghosn’s “CEO reserve,” a pot of money that he was free to decide how to spend. He said the “CEO reserve is not a black box” and “four officers signed” for the payment to al-Juffali.

Ghosn is also accused of receiving 7.82 million euros ($8.9 million) in improper payments through Nissan-Mitsubishi B.V., a Netherlands-based joint venture between the two Japanese companies. He said the venture was established for “synergy and not for payment,” adding that the claims of improper payments were a “distortion of reality.”

Ghosn said his purchase of luxury properties in Rio de Janeiro and Beirut — which Nissan alleges were paid for improperly through a subsidiary — were approved by the legal department. Pointing to a former loyalist and long-time executive in the legal department, Ghosn said: “Hari Nada has done all this.”

He justified the houses on the grounds that he “needed a safe place where [he] can work and receive people in both Brazil and Lebanon.”

“[Have I] done [something] inappropriate? I am not a lawyer, I don’t know the interpretation of [such] facts,” Ghosn said, showing his frustration over Nissan’s internal investigation.

“These are known by everybody, why didn’t they tell me?”

Ghosn, whose second bail request was rejected Jan. 22, insisted that he was not a flight risk and he would not destroy evidence.

“I won’t flee, I will defend [myself],” he added. “All the evidence is with Nissan, and Nissan forbids all employees to talk to me.”

When asked about life in the detention center, Ghosn said “there is up and down.” As for his health, he simply said he was “doing fine.”

After his arrest, Ghosn appeared to have envisioned attending a Renault board meeting in Paris, explaining his position, and holding a news conference. But his prolonged detention in a Tokyo jail frustrated those plans.

Nissan dismissed Ghosn from his position as chairman in November. An extraordinary general meeting of shareholders scheduled in mid-April is expected to remove Ghosn as a director.

Ghosn resigned as chairman and CEO of Renault, and former Michelin chief Jean-Dominique Senard was appointed as the chairman.

The three members of the alliance are expected to revisit how it is operated in the absence of Ghosn’s leadership. “I cannot speculate about the future of the alliance,” Ghosn said.

The French government, Renault’s largest shareholder, has previously requested Ghosn make the relationship between the two automakers “irreversible.”

Following Ghosn’s arrest, France also informed Tokyo of an intention to press ahead with integration. Saikawa, in contrast, has insisted there is “no need for now to discuss [it].”

Interviewed by Nikkei commentator Atsushi Nakayama and Nikkei staff writers Akito Tanaka and Yosuke Kurabe.


Ghosn charges are thin soup — case for ex-Nissan boss
Prosecutors fail to make a strong case against car maker’s former chief
By Stephen Givens, Nikkei Asian Review, January 29, 2019

Two months after his arrest at Haneda Airport and confinement at Kosuge detention center, we now have a good picture of the criminal case against Carlos Ghosn-and it looks like pretty thin soup.

As reported in the media, the evidence shows not criminal malfeasance, but at most lapses in judgment and corporate protocol that ultimately did not result in any actual harm to Nissan Motor or its shareholders or personal enrichment of Ghosn.

The criminal case turns on a series of technical and subjective judgments about whether the words of the relevant statutes and regulations apply to the transactions in question.

By any objective measure, the misconduct alleged was less serious than the corporate misfeasance that is routinely overlooked in Japan or handled by noncriminal administrative wrist-slapping.

The first, and for many weeks the only, criminal charge brought against Ghosn was that Nissan’s periodic securities filings disclosed just the currently payable portion of his compensation. They failed to report the portion deferred until after his retirement.

Ghosn’s motive for not wanting to report his full compensation currently-that it was embarrassingly large in relation to that of other Japanese CEOs and Ghosn’s Nissan colleagues — does not constitute serious criminal intent.

Further, the evidence indicates that Ghosn tried in good faith to structure the deferred compensation in a way that would permit him legally not to report it currently under the rules, which require current reporting of director-level compensation only to the extent the right to receive it has become “clear.”

Though the documentation has not been made public, it appears that it was structured as some kind of post-retirement consulting arrangement that would, at a minimum, require Ghosn to provide Nissan with services after retirement to collect the compensation.

It is hard to imagine that Nissan would have failed to report Ghosn’s deferred compensation over many years without professional legal advice that it did not need to be currently reported because Ghosn’s right to receive it was conditional.

It is equally hard to understand why Nissan’s Japanese management, having condoned the deferred compensation arrangement and its nonreporting for years, is now using it as the lead card in the criminal case.

Beyond this, criminal liability under the Financial Instruments and Exchange Act for false disclosure is explicitly predicated on the requirement that it be “material”- that is, it would have a significant impact on an investor’s decision to sell or buy Nissan shares.

For investors, the amount of Ghosn’s unreported deferred compensation, about $10 million per year, is clearly very small compared to Nissan’s $90 billion in annual revenues.

Meanwhile, Japan’s weak securities disclosure standards permit Nissan not to reveal information that would be much more relevant to investors, such as the terms of the “alliance” contracts between Renault, Nissan’s major shareholder, and Nissan.

It does not inspire confidence in Japan’s justice system that Ghosn’s guilt or innocence on the this charge will hinge on semantic distinctions over the meanings of “clear” and “material.”

The second criminal charge against Ghosn is for two, related claims of “aggravated breach of trust” under the Companies Act. This vaguely-worded statute imposes criminal liability on directors of a company who for personal gain “commit an act in breach of such person’s duties and causes financial damages” to the company. Typically this statute is applied to cases of embezzlement-executives taking company assets.

The first prong of the breach of trust charge has been loosely characterized in the press as “the shifting of Ghosn’s personal foreign exchange losses to Nissan” but details of the transactions disclosed by Ghosn’s lawyers show it to be less pernicious than advertised.

Ghosn entered into a foreign exchange hedging transaction with Shinsei Bank to protect his yen-denominated Nissan compensation against the risk of depreciation. Like many others he failed to anticipate the financial crisis of 2008, which sent the yen soaring and reduced the value of the Nissan securities he had offered Shinsei Bank as collateral.

Shinsei Bank asked Ghosn for additional security. Ghosn considered offering the value of his uncashed Nissan retirement allowance-but doing so would have required him actually to leave Nissan at a time he was a vital part of the management. Instead, he asked Nissan to guarantee his downside risk on the hedge, but pledged to fully cover the liability.

Critically, Ghosn’s request for help with his unexpected difficulty received formal approval by the Nissan board. Admittedly the Securities Exchange Surveillance Commission (SESC), deemed the transaction improper a few months later and ordered Nissan to get rid of the hedging contract.

So, Nissan carried a contingent liability — fully guaranteed by Ghosn — as an accommodation to its CEO for approximately four months. Nissan suffered no actual loss and was never at risk because it was fully covered by Ghosn’s retirement allowance. The transaction was not concealed; it was approved by the Nissan board and reported to the SESC, which saw no reason to request a criminal probe a decade ago.

So, you may ask, where is the crime? According to news reports, it turns out the prosecutors are not satisfied with the drafting of the board resolution. They are quibbling that the board resolution did not mention Ghosn by name and only referred generically to “foreign board members” as beneficiaries of the transaction. Moreover, the prosecutors are claiming the resolution was not specific on how Nissan was to be protected with 100% certainty against possible loss. Ghosn’s criminal liability turns almost entirely on the wording of a board resolution that Ghosn himself surely did not draft.

The second prong of the breach of trust charge relates to the subsequent transfer, in compliance with the SESC’s order, of the Shinsei Bank contract from Nissan to companies controlled by Saudi national Khaled Juffali. Nissan affiliates in the Middle East paid Juffali’s companies $14.7 million over four years for variety of “support activities” in the region. The prosecutors claim that Nissan’s money was paid for Juffali’s guarantee of Ghosn’s personal contingent liability.

It seems unrealistic, however, that anyone would pay $14.7 million of Nissan money for a guarantee of a contingent liability worth at most $16.7 million-a huge overpayment.

This strongly suggests that Juffali’s companies were being paid for doing more than simply backing Ghosn’s Shinsei liability. The more commercially-likely scenario is more innocuous, one in which Ghosn asked a friendly business counterparty to assume an essentially riskless contingent liability as a favor in the context of a long-term business relationship. This represents the kind of mutual exchange between companies with long-term relationships practiced daily by the Japanese corporate establishment.

No question, a more scrupulous and careful executive would have avoided pushing the gray boundaries of the law. But nothing we know that Ghosn allegedly did smells like a serious crime deserving prison. That he remains in confinement while the prosecutors argue semantics to deprive him of his freedom places Japan’s criminal justice system in an awkward light.

Stephen Givens is a corporate lawyer based in Tokyo.



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39 comments on “’s stance on the Carlos Ghosn Case, at last: A boardroom coup making “thin legal soup” that might shame Japan’s “hostage justice” judicial system into reform

  • David Markle says:

    There are some other factors that might have contributed to his downfall that are typical of Japan that I have heard any foreign press speculate on. That he had brought several executives from Renault (nj) and installed them as vice presidents in charge of marketing and research among others. If he had been able to continue with his planned merger of the three companies he would have continued to bring no into Nissan as BOSSES of Japanese! This was his crime and needed to be stopped at all costs. As anyone who knows anything about Japan corporate culture, nj must NEVER have any real responsibility and especially never be the bosses over Japanese!

    I was listening recently to a Diet member argue against changing visa rules to allow for more nj to work and live on Japan and her argument was “well what if a nj comes here and stays and starts a company! That means that maybe Japanese will end up working for a foreigner! heaven forbid!”

    Mr. Gohn has committed the ultimate crime of bringing nj into a major Japanese Corporation and given them power over the natives. For this he must pay!

    • Yes. This is the point. I’ve been in my Japanese company for 15 years and haven’t been promoted once. I now report to Japanese people who have been promoted above me but who have less experience. Non Japanese can’t be in power over Japanese.

      • if I were you I would accidentally withhold any knowledge you have acquired in your extensive experience and just do the bare minimum. They are “superior” to you, after all!
        They want a dumb gaijin, thats what theyll get.

    • The reason why no one is talking about this is it is too childish to even believe. People could not believe that Japan is still this childish.

      • David Markle says:

        It’s usually closeted in the old “foreigners can’t understand unique Japanese culture” mindset that prohibits no from being taken seriously. If you prove yourself worthy of trust, (by learning the language, buying property, showing that you are more than a fly by night glorified tourist) you will unceremoniously be shown the door.

  • Jim Di Griz says:

    Yes, Ghosn wouldn’t get much sympathy as a 1%er in the west, but he wasn’t arrested for being a 1%er, he was arrested for not being Japanese. That’s all that matters.
    Abe appears complicit in several crimes, but his status means he doesn’t even have to ask questions; Japan doesn’t care that Abe is a 1%er.

  • laurel kamada says:

    Debito, Thanks for this . It is very helpful and informative and a concise summary of the problem with the legal system here.

  • It has been quiet recently about Ghosn in foreign media. The last news I’ve read was that Renault nailed him too for telling Japanese that Ghosn received €50,000 ( not million ) in some kind of contribution. Probably they will extend his dentention again because of this. J System is torture and as you wrote where are the other responsible. Where are the people who mislabel good etc. Big bow and back to business. They are probably contributor to LDP. Unfortunately foreigners cannot contribute it. I wish foreign media wrote more about it but I guess they don’t want to mess with “Big Japan”

  • I’m re-sharing a comment I posted two weeks ago:

    Yes, that AssociatedPress article was deleted by both JapanTimes & JapanToday, here is the archived evidence:

    “…the allegations were unfounded, since the suspected unreported pay was deferred income he had not yet received.”

    This “we’ll pay you later gaijin-san, trust us” Deferred-Pay-Plan was indeed signed by the coup leader current Nissan President and CEO Hiroto Saikawa:

    “Investigators at the Special Investigation Department of the Tokyo District Public Prosecutors Office … obtained a paper listing the pretext for the deferred payment that bore the signatures of … Nissan President and CEO Hiroto Saikawa”

    So, it turns out the whole “lying about income” charge which was used to arrest Ghosn in the first place was always absolutely illogical since: one does NOT have to pay tax for money one has NOT received.

    The correct time to report and pay any income tax is: the March AFTER one has actually received that income.

    One does NOT need to pay taxes many years in advance based on some company merely promising, “we’ll pay you billions of yen many years in the future gaijin-san, after you retire, trust us.”

    Which is why the “lying about income” charge which was used to arrest Ghosn in the first place HAD to be dropped.

    (And thus, during the unlawful jailing for that first DROPPED-charge, two other new charges have been subsequently drummed up instead.)

    Oh, and here’s an extra footnote: even though Saikawa’s Nissan NEVER DID pay those billions of “deferred payments” to Ghosn, and even though Saikawa’s Nissan probably NEVER WILL pay those billions of “deferred payments” to Ghosn, Saikawa’s Nissan is now illogically “cleaning up their books” by placing those (absolutely NOT paid) billions into the March 2019 “expense” column, thus illogically & illegally reducing the company’s tax obligation, and strangely (but not surprisingly) Japan is allowing this action to be done by Saikawa’s Nissan:

    By the way, just like Debito & Jim & Baud, I too don’t like trillionaires, billionaires, or even millionaires, since such inequality in pay is inherently unfair to the people slaving away at the factories MANY more hours per week doing MUCH harder work (harder work, dirtier work, and more dangerous work) for comparatively slave wages.

    So it feels weird for me to spend even a moment’s time defending this millionaire jerk Ghosn, but as it happens, as I stated in my summary above, the correct time to report and pay any income tax is: the March AFTER one has actually received that income.

    So that first “tax evasion via under-reporting income” charge was an ILLEGAL ARREST performed by those police officers of Japan and approved by those prosecutors of Japan, so there is no need for me to even bother disproving the subsequent charges they drummed up after the initial ILLEGAL ARREST.

    In my opinion, those specific police officers those specific prosecutors who committed the illegal arrest for the NON-crime of “not reporting income which one has not yet received” are themselves the real criminals in this situation.

    In my opinion, those specific public workers violated Japan’s Penal Code Article 194 (“Keihou Dai 194”) which outlaws a police officer from confining an individual without first having the prerequisite probable cause to reasonably believe an ACTUAL CRIME had been committed in the first place.

    Thus, in my opinion, the specific police officers and the specific prosecutors who committed the illegal arrest in the first place are themselves guilty of the ACTUAL CRIME of Shokken Ranyou, a very serious crime which has a penalty of putting those specific criminals into prison for up to 10 YEARS according to the law of Japan.

    Naturally, I know that Shokken Ranyou law of Japan is rarely applied in general and of course WON’T be righteously applied against these specific police officers nor against these criminal prosecutors, I just wanted to remind readers that in my opinion these criminal public workers SHOULD be justly arrested for their crime of Shokken Ranyou.

    Those specific public workers should be justly held in jail for an equally long time until they admit that they committed the ILLEGAL ARREST due to orders from specific bosses.

    And then of course those specific bosses justly should be held in jail for an equally long time until they admit they arranged the ILLEGAL ARREST due to bribery from, ahem, interested parties who stood to gain (and who did gain) from this illegal arrest.

    Summary: I feel those police officers and those prosecutors committed the criminal action of initiating and performing the arrest of an individual for a non-crime.

    Perhaps those police officers and those prosecutors might attempt to convince a judge that my opinion has caused them to suffer a provable reduction in income?

    Or, perhaps a deep investigation of those specific police officers and those specific prosecutors may indeed reduce their future income: when the Nissan bribe evidence is righteously leaked for justice those specific bozos won’t be able to receive any future bribes! 🙂

  • “Mr. Gohn has committed the ultimate crime of bringing nj into a major Japanese Corporation and given them power over the natives. For this he must pay!”

    I agree with 100%. I was told this by a Japanese, that they will never work for a foreigner if there is another option.

    interesting that they lord over many factories in the US, and that many US politicians are unaware of their racist views, or simply dismiss them.

    In fairness, Horie and a Japanese female actor got prosecuted for some bucking the system (charges of financial crimes and growing weed were what was reported in the media, but they claim otherwise) so Japanese can get nailed also, but mostly only sacrificial radicals. Mainstream old guard CEOs etc seem to escape justice.

    • Only extreme Japanophiles (anime geeks) are likely to still want to come. “Foreign executives seeking to work in Japan likely have a special fondness for the country, Raphael said.”

  • It could be just me, but this article seems to point to the fact that Japanese companies are either not up for grabs for foreign buyers, have not enough transparence & governance, or both.

    Japan’s lop-sided M&A boom
    Nation’s companies invest record amounts abroad, but foreign groups steer clear of Japan
    William Pesek
    MARCH 04, 2019 03:00 JST

    Shinzo Abe’s “Japan-is-back” pledge was much in evidence in the corporate world in 2018 as the country dominated mergers and acquisitions in Asia.

    Outbound M&A deals reached an all-time high of 777, up nearly 16% and a fifth straight record for Japan Inc. Executives spent roughly $175 billion last year tapping overseas growth to offset a shrinking and tepid domestic market, in a buying surge that was second only to the U.S.’s.

    Yet the boom is a notably one-way affair. Inbound M&A fell last year to $7.6 billion, according to data company Refinitiv.

    Asia’s second-biggest economy is really back from decades of deflationary funk and gearing up for a bright future, how come investors are not rushing to Japan?

    To be fair, there have been significant nibbles. The 2016 purchase of Sharp by Taiwan’s Foxconn Technology Group certainly turned heads. Yet that $3.5 billion transaction is far more exception than rule. It pales in comparison with Takeda Pharmaceutical buying Ireland’s Shire last year for $62 billion. The lack of similar headline-grabbing bids for cash-rich Japanese companies betrays the limits of Abe’s turnaround efforts.

    Takeda Pharmaceutical President Christophe Weber, pictured at a news conference in Tokyo on May 9 2018, has his sights set firmly on the U.S. (Photo by Wataru Ito)
    Indeed, things are turning out very differently than Abe telegraphed in 2012. Nine months after his return to the premiership, in September 2013, he took his reform message to the New York Stock Exchange. As Abe implored traders to “buy my Abenomics,” he even cited Gordon Gekko, the corporate-raider at the heart of Oliver Stone’s 1987 “Wall Street” film. “Today, I have come to tell you that Japan will once again be a country where there is money to be made.”

    The 57% surge in the Nikkei Stock Average that year punctuated the point. Missing, though, is the long-term foreign direct investment needed to enliven a rigid and insular corporate culture. Buying shares in a Japanese company is one thing. Taking one over is quite another.

    Abe’s limited ambition on this score is part of the problem. From the very beginning, Abenomics set a 35 trillion yen, or $314 billion, goal for the cumulative stock of FDI by 2020. In 2017, it was still well short at $256 billion. It is important to consider how low that is for a $4.9 trillion economy. On average, Organization for Economic Cooperation and Development members have secure an accumulated stock of FDI equivalent to 38% of gross domestic product. Abe’s target would put Japan’s take at about 4% of GDP.

    What is turning off the Warren Buffetts of the world? A shaky revival, for one thing. Yes, Abenomics helped deliver the longest expansion since the 1980s. But caveats abound. Abe was lucky enough to roll out his reflation program amid the most robust synchronized global recovery in decades. China’s boom, and its voracious demand for Japanese goods, also helped.

    Abenomics has not, however, given workers the sizable raises the government promised. It relied too heavily on Bank of Japan stimulus and a weak yen, not enough on deregulation. More than six years on, Abe’s government has taken few significant steps to loosen labor markets, reduce bureaucracy, incentivize new research and development or grow the nation’s startup scene. Nor has Tokyo sufficiently addressed its demographic time bomb.

    The biggest turnoff is a blinkered corporate culture in the news for all the wrong reasons. The stunning arrest of Carlos Ghosn of Nissan Motor in November dented the Japan brand. Since then, the indefinite incarceration of the nation’s best-known non-Japanese CEO has given food for thought to executives considering top jobs in Japan. Bad timing, considering Abe’s hopes of diversifying boardrooms with foreign talent.

    And yet it points to the reason for the glacial pace of change. Abe’s 2013 Wall Street sales pitch centered on the corporate governance revolution he claimed to be cooking up. And, credit where it is due, Abe did introduce initiatives to internationalize practices. They include a U.K.-styled stewardship code of conduct and calls for more outside directors.

    But the upgrades are largely voluntary and have been insufficient to avoid scandals at Kobe Steel, Nissan, Olympus, the camera maker, air bag manufacturer Takata, Toshiba and others. Tokyo is not policing cross-shareholdings between friendly companies. Little has been done to incentivize productivity and innovation. Companies are not scrapping the intricate takeover defenses that scare away Buffett and his kind.

    Masayoshi Son, too, is less than enthused. Japan’s answer to the Sage of Omaha is busily remaking the global venture-capital game with his $100 billion SoftBank Vision Fund. The nation’s richest man is lavishing cash from Silicon Valley to India to Saudi Arabia to Singapore — just not at home.

    Not surprisingly, Son is hedging against Japan’s aging population. So are many of Japan’s most charismatic CEOs, including Tadashi Yanai of Fast Retailing, operator of the Uniqlo casualwear chain.

    The reach for overseas growth is intensifying. Takeda Pharmaceutical’s blockbuster last year helped Japan leapfrog over China in outbound M&A deals. And bankers are preparing for another boom year as trade-war tensions hit domestic growth.

    The good news is that Japan appears to have learned from past stumbles. In the 1980s, the last time Japan Inc. rushed abroad en masse, executives snapped up California’s Pebble Beach golf course, Manhattan’s Rockefeller Center, Hollywood studios, and Vincent Van Gogh’s Sunflowers masterpiece. They often overpaid, leading to billions of dollars of write-downs once Japan’s asset bubble burst.

    Those purchases were often trophies. Today’s are strategic bets on where the economic growth is. And this time, the pricing is more responsible. Last year, Japanese executives paid a roughly 23% premium in acquisitions, the lowest since 2013, according to Bloomberg.

    Record profits, a product of a 30%-yen depreciation on Abe’s watch, left Japan Inc. with an embarrassment of riches. In fiscal 2017, cash reserves of Topix-listed companies reached an eye-popping $994 billion. Under pressure to deploy that cash, executives are wisely picking targets abroad.

    It is odd, though, that corporate Japan is not attracting more bids from abroad. Consider it a wake-up call that Abe’s reform efforts are not impressing long-term investors. It is great that corporate Japan is globalizing, but the Japan-is-back narrative would be more convincing if cash flowed in both directions.

  • Baudrillard says:

    Abe’s “Japan-is-back” pledge is his nostalgia for the 80s. And Japan didnt have many foreign CEOs of note then and was in fact quite exclusionary, yet successful.
    Those were the days when “I dont like or work with gaijin” was an acceptable personality trait or business choice, the freedom to exclude!

  • Debito, not sure how much contact you’ve had with TkyoSam lately, but a friend of his is actually in jail right now. Got arrested as part of a drug bust that he had no part in other than the guy who actually DID try and acquire drugs was staying at his place. Tkyo’s editing a YouTube video where he talks about it. Might be a good thing to hear your opinion on, and share the story.

    — I’ve actually met up with Sam and heard the story. I’ve invited him or someone else who can to write up this case for (Authorship can be anonymized as long as it’s reliable.)

  • Jim Di Griz says:

    Carlos is mysteriously re-arrested at 6am this morning because prosecutors want to ask him about the charges that are being investigated in France;

    What about this guy? He’s being investigated in France too, why don’t the prosecutors arrest him?;

    Oh yeah, he’s Japanese so he doesn’t get arrested over investigations in France?

  • It’s strange that this would be legal. To actually arrest someone in Japan over an investigation that is taking place in a foreign country.

    On what grounds did they arrest him?

    Or do they even need any grounds?

  • Carlos Ghosn’s lawyer slams rare rearrest on bail in Tokyo as ‘act of aggression’ Japan Times April 4, 2019:

    A highly unusual move by Tokyo prosecutors to arrest former Nissan Motor Co. Chairman Carlos Ghosn for a fourth time on Thursday morning marked the latest plot twist in an almost five-month legal drama, and could reignite criticism of Japan’s judicial system, dubbed by critics as “hostage justice.”…

    The arrest came less than 24 hours after he announced, from a newly launched Twitter account, that he was “getting ready to tell the truth about what’s happening,” and would hold a news conference in Tokyo on April 11.

    Coincidence? I don’t think.

  • OK Japan, we get it already.

    Japanese police are just a private gestapo army for the J-elites. Will they do anything they are told to do? Looks like it.

    Ghosn prosecutors finally catch a fish
    While investigators now probe serious charges, their approach raises concerns
    Stephen Givens, Nikkei Asian Review APRIL 05, 2019

    Carlos Ghosn’s rearrest, this time on allegations that appear more serious than the initial charges, creates the strong impression that from the start this has been a fishing expedition in search of a crime.

    With the early casts, the best the prosecutors could find were minnows, in the form of the alleged misreporting of the former chief’s compensation from his employer, Nissan Motor, and charges that Ghosn used Nissan’s credit to backstop his liabilities on a currency swap contract.

    Now the investigators seem to have hooked what looks like a real fish — claims of aggravated breach of trust concerning payments by Nissan to an Omani distributor that were funneled back into companies controlled by Ghosn.

    Criminal investigations, of course, are not supposed to be open-ended fishing expeditions to uncover unsuspected crimes. In the U.S. and other advanced countries, prosecutors are bound by rules of conduct that prevent them from poking into the lives of innocent citizens just to see what “turns up.”

    The question of what kind of information is sufficient to launch a fair investigation is not black and white. But in Japan the prosecutors’ discretion is exceptionally wide and so should be used with great care. The Ghosn case shows that almost any business person suspected of even a minor infringement of corporate laws could be targeted.

    Normally, a criminal investigation starts when a victim reports a crime or a dead body is discovered. In Ghosn’s case, the complaint was not submitted by victims claiming Ghosn had hurt them, but by fellow Nissan executives alleging that their boss had damaged the company.

    Behind their complaints lay their alarm at his plans to merge Nissan with the French group Renault, which holds a 43% stake in Nissan. Nissan executives spent months scouring company files looking for evidence they could take to the prosecutor. Ghosn claims they did so to oust him and scuttle the merger. He denies any wrongdoing.

    The evidence of wrongdoing Nissan executives were able to deliver to the prosecutors was not overwhelming, but enough to launch an open-ended investigation to find more. The initial charges provided a pretext to detain Ghosn for three months, interrogate him on a daily basis and see what he might confess to.

    Unfortunately, for a long time the best the prosecutors could find were minnows. The first set of charges was that Ghosn was criminally liable for Nissan’s failure to disclose in its periodic securities reports a portion of his compensation that was to be deferred until after his retirement.

    The second set of charges related to a currency swap contract between Shinsei Bank and Ghosn. Ghosn asked Nissan, with the Nissan board’s consent, to backstop his liabilities under the contract for a period four months in 2009. Nissan’s risk under the guarantee was minimal to begin with and it was never actually called. The facts surrounding the charges had been well known, not only within Nissan but by government agencies, for a decade.

    Outside Japan, minor charges of this nature would never have led to criminal arrest and extended detention and interrogation, as they did in Ghosn’s case. They would have been handled as an internal Nissan matter, or at most in a legal proceeding culminating in warnings or possibly a fine. Yet the prosecutors agreed to escalate the evidence handed to them by Nissan to a full-blown criminal prosecution against Ghosn with the possibility that, if convicted, he would serve years of hard time in prison.

    During Ghosn’s three-month detention, there were various reports of seeming improprieties by Ghosn that, if anything, sounded more serious than the minor charges officially lodged against him. News reports told of lavish wedding parties at Versailles, mansions in Brazil and Lebanon, consulting contracts for his sister, “paying himself” $9 million. Yet none of these has so far led to arrests or indictments.

    The most recent charges are more serious because, if the reported facts are true, Ghosn diverted Nissan money into his own accounts. Neither of the initial charges involved anything close to actual embezzlement — dipping into the company till for personal gain.

    If the facts turn out to be true, and we do not know for now, then a criminal case against Ghosn is warranted.

    But the suggestion that the prosecutors may have finally come across evidence of a substantial crime, does not change the fact that this was a fishing expedition from the start. Authoritarian regimes tolerate open-ended investigations of citizens without a good reason to suspect them of specific wrongdoing — not liberal democracies like Japan. Yes, open-ended investigations sometimes turn up something. But that should not make us comfortable with random investigations of innocent people to see what emerges.

    Whether Ghosn will be returned to Kosuge Prison for further detention following the latest arrest will be another interesting test of the Japanese criminal justice system. Theoretically, detention for purposes of interrogation is not permitted by the Japanese constitution. Detention is warranted only if a suspect is likely to flee or destroy evidence. Ghosn has already established to the satisfaction of a Japanese court that he is not likely to flee or destroy evidence. If Ghosn is detained again, prosecutors should have to establish he is likely to tamper with evidence relating to the new charges, or perhaps that he has violated the conditions of his current release by, for example, opening a Twitter account and announcing a press conference.

    Prosecutors are probably now heaving a sigh of relief that they seem to have caught a real fish. It should not exonerate them from having engaged in a fishing expedition.
    Stephen Givens is a corporate lawyer based in Tokyo.

    • Jim Di Griz says:


      I said it before; the J-police are so overstaffed and underworked that instead of investigating reported crimes to discover the facts, they are picking residents/citizens that they come across and investigating them for however long it takes until they find a crime no matter how minor.

      Ghosn is an example of this policy in action.

      As an NJ, you better hope no one with a grudge passes your name to the police.

    • “In the U.S. and other advanced countries, prosecutors are bound by rules of conduct that prevent them from poking into the lives of innocent citizens just to see what “turns up.”

      OK, so Japan isn’t advanced. we get it.

      “The Ghosn case shows that almost any business person suspected of even a minor infringement of corporate laws could be targeted.”

      So much for “Japan is open for business!” More like, open yourself for arrest.

  • “Authoritarian regimes tolerate open-ended investigations of citizens without a good reason to suspect them of specific wrongdoing — not liberal democracies like Japan”

    You have contradicted yourself.

  • Jim Di Griz says:

    Interestingly, Carlos was due to do an interview on Fox Business News (apparently) moments before they arrested him (hence the early morning).
    Were the police illegally tapping his phone and pounced when they realized he was moments from speaking publicly to the international news media?
    Has anyone heard anything about this? I’ve heard that Fox was outraged, and lambasted J-police on live TV.
    I also heard that a female prosecutor subjected his wife to a strip search at the property, but have been unable to confirm that. Anyone?

  • Recent developments in this case make it clear it wasn’t a simple anti-NJ coup.

    Sept 2nd, there’s a new prosecutor (because the previous prosecutor was getting nowhere with the BS case against Ghosn that was relying solely on a forced confession rather than actual evidence);'s-handling-of-carlos-ghosn-case

    And this is the very day after Ghosn’s lawyer accused prosecution of being biased;'s-lawyer-says-Tokyo-prosecutors-lack-impartiality

    And less than a week later, it comes out that the whistle-blower who made initial allegations against Ghosn received ‘excess compensation’ himself!

    And on the same day, the investigation reveals that the guy the whistleblower informed, Saikawa, was himself being overpaid! (Oh, and the investigation is now concluded having reached that conclusion, and the investigator will be leaving his employment at Nissan);

    So, Ghosn, the Japanese whistleblower, and Saikawa ALL stand accused to taking Nissan money they weren’t entitled to.
    Ghosn gets arrested and is facing trial.
    The whistleblower and Saikawa get off with a bow and a ‘sorry’.
    The investigator gets forced out of his job.

    This must be that ‘endemic corruption at all levels of society’ that the Economist report was talking about.

  • In my home country, courts set trial dates, but in Japan it seems that prosecutors do. And what do we have?
    19th November 2018: Carlos arrested for suspected financial irregularities.

    That’s right. Court date set for April 2020!
    I guess the prosecutors are so reliant on forced confessions that Carlos’ refusal to give them one still means they’ve got NOTHING on him. Which is why they can’t go to court NOW.
    Instead they are punishing him for refusing to co-operate by dragging out his inhumane pre-trial conditions that prevent him from being with his family. I guess they are hoping that over a year of psychological abuse will make him voluntarily confess to just about anything, and if it doesn’t, who wants to bet that the trial will drag on and on with endless postponements for years (as we have seen in other cases, I’m thinking Minamata-byou, Tepco executives trial, Hibakusha) with the aim of the prosecution having never to get to the point in a trial where a judgement is reached (that would expose the fact they have NOTHING).
    No, the point here is that they have Ghosn trapped in a Kafka-esque nightmare that they can continue for decades if they wish.
    Here’s hoping the start/delays to his trial/hearings make the news everyday throughout 2020 and any international events in Japan are overshadowed by them.

  • Jim Di Griz says:

    Ghosn’s legal team changes strategy: appoints former French ambassador (and human rights lawyer) to fight case as abuse of Ghosn’s human rights rather than embezzlement case defense.
    Argues that Japan’s legal system violates international human rights conventions Japan is party to, and proud to mount such an attack on Japan’s legal system for benefit of ‘all sorts of people in Japan’.
    Finally, someone ‘gets’ what this case is about; outsiders being disenfranchised by the system.

  • I brought this up some months ago, but more proof;

    Japanese arrested for rape 4 days after statute of limitations expired.
    I do not want to comment on the hideous crime, and suspects deserve their day in court given the Japanese police’s reliance on forced confessions.

    What is relevant is that in this case, the Japanese found a suspect after the statute of limitations had expired. Then they applied this ‘rule’ that the statute of limitations doesn’t include time spent outside of Japan, and scoured the suspects personal movements to find 4 days when he was out of the country so that they could extend the expiration date of the statute of limitations and arrest him.

    Personally, I don’t think there should be a statute of limitations on rape.

    It’s relevant to because the statute of limitations on crimes Ghosn is alleged to have committed has expired, but his time out of Japan has been deemed to be a suspension of the statute of limitations allowing his arrest and ongoing prosecution. Meanwhile all of the Japanese Nissan managers who must have been aware of/assisted in any corporate crimes non-Japanese literate Ghosn may have committed have escaped arrest as the statute of limitations on their crimes has already expired. Handy, isn’t it?

    Of wider relevance to readers is that you could be accused of anything by anyone and find yourself arrested way beyond the statute of limitations if you’ve been in and out of the country.

    Way to attract that foreign talent/protect your own!

  • “…some of the accusations, which fall under a statute of limitations of seven years under the Companies Act, are still applicable. Prosecutors have argued that statutes do not apply to Ghosn because he spent time overseas.”

    This is extremely faulty jurisprudence. Head up your bum type jurisprudence. The purpose statutes of limitations is to make sure that plaintiffs pursue their claims with a certain amount of diligence and so that evidence does not get lost and memory doesn’t become dim as regards to the facts. All of these are tied to the nature of the alleged offence and to the act itself, nothing at all to do with where a person had been living.

    We gave them a legal system the couldn’t comprehend, so we shouldn’t be surprised when they break it.


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