The collapse last week of the fourth largest Japanese securities firm, Yamaichi Securities, is simply the pay back for practices which have long been illegal, securities experts say. Western sources and sources in the US financial markets have for more than two decades been complaining about the continuation in Japan of practices which are highly illegal in the US and which result in stiff jail sentences for those caught engaging in them in America.
Japanese corporations give almost no financial information to their stockholders.
While US stockholders are accustomed to receiving massive 10-K reports which are often more than 100 pages in length, investors in Japanese securities receive a one page summary sheet which contains almost no financial information at all. It is only recently that laws were passed making it illegal for Japan corporate executives to pay bribes to induce disgruntled stockholders not to ask embarrassing questions at public stockholder's meetings. In summary, Corporation A buys a large block of stock in Corporation B, while Corporation B buys an equally large block of stock in Corporation A, and so on. Through this practice, it becomes impossible for outsiders to take over a Japanese corporation and to throw out inefficient or even corrupt management. This practice was made illegal in America by the Securities Act of 1933 but has continued to be practiced by all of the major securities firms in Japan.