So now Japan’s Prime Minister, Yoshihiko Noda has waded into the Olympus scandal. He tells the FT in an interview that he is worried that world will generalise from the specifics of what has happened at Olympus.

So let me recap. Two weeks ago, the company’s worldwide President and CEO Michael Woodford was fired – just six months after becoming President and a stunning two weeks after becoming CEO.19 olympus g 620 Why the Olympus scandal affects us

Mr. Woodford claims that he had found something very ugly in the Olympus woodshed – rather he had found something missing from the self same woodshed. A staggering $1bn of shareholder value – made up in part by $687m in ‘fees’ paid to an ‘agent’ in the take-over of a British company called Gyrus. Normally such fees range between 1 per cent and 2 per cent. The fees in the Gyrus take-over represented a shocking 36 per cent. Olympus make cameras and precision optical instruments. Gyrus’s business was at least in the same field. But in the same period, Olympus had also decided to take over several other companies which made completely unrelated products in which the company had neither expertise nor previous interest – companies that marketed face creams and plastic food boxes among them. Those take-overs necessitated the company writing off $600m in the first year of acquisition. Hence the combined total of loss to shareholders added up to some $1.2bn.

Prime Minister Noda is warning that the row threatens to contaminate Japan’s reputation for a ‘rules based market economy’. Olympus say all the payments were legal and appropriate, but cannot explain why much of the money ended up in a Cayman Islands entity which ceased to exist as soon as the cheques had cleared.

I have known Michael Woodford for several years. I have visited the plant in Southend that he ran as Olympus’s Director European operations. He had worked his way to the top after joining the company as a 15 year-old, thirty years ago. He is a driven, efficient, and principled man. His appointment, as a foreigner, to the top job in Japan’s third largest company was both a surprise and no surprise, He was the man for the job, His appointment was unanimously approved by the entire Japanese board, as was his firing two weeks later.

In the aftermath of the resignation its Chairman, on the heels of Mr. Woodford’s departure, Olympus says it will commission an independent investigation. Mr. Woodford questions how independent it will prove to be.

The Japanese Premier leads the Democratic Party of Japan. In 2009 his party defeated the LDP who had been in power since 1955. A factor in his victory was the national concern about corruption. There were allegations that Yakuza, the Japanese organized crime syndicate had grown considerably during the LDP’s rule. At the time of the election it was estimated that Yakusa had a membership of more than 100,000. One of the hallmarks of Yakuza’s activities is the penetration and distortion of corporations for illicit gain. Such is the power of Yakuza that few in Japan will speak openly of either their suspicions or knowledge of their activities.

So why does all this matter? Well, Olympus employs thousands of workers in Europe, a good number of them in the UK. Its share price has collapsed by 56 per cent since Mr. Woodford was fired. The FBI and the UK’s Serious Fraud Office are both investigating. Japan remains the world’s third largest economy. Japan is one of the economies that the Eurozone are looking to support the current bail-out. Japan may feel remote. The film ‘Lost in Translation’ neatly describes its ‘otherness’, but if Japanese corporate confidence sneezes we could all catch a cold that our immune systems are in no shape to combat.

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