Cultural Legacies and Their Implications for Accounting and Accountability in Modern Japan

Accounting is often perceived as a neutral tool to record and review the financial position of an organisation. However, past research indicates that accounting standards and practice strongly reflect the intentions and values of both national governments and individual organisations. This research investigates how the beliefs and values of Japanese businesses, their owners, managers and employees, have historically influenced their accounting and accountability. Confucian teachings, which encouraged high moral standards in all aspects of Japanese society, have been the major determinant of these values and beliefs since the Edo era (1603-1868). The research is conducted from a Foucauldian perspective within a critical accounting framework, using archival documents and semi-structured interviews. The Foucauldian perspective on power and disciplinary control is applied to understand the historical development of accounting and accountability in Japan where Confucianism is significantly embedded. Power relationships in Japan encouraged and maintained Confucian-based values which became fundamental norms for the achievement of the collective well-being of the nation. However, Confucian teachings have been sometimes misused to endorse fraudulent accounting practice in Japan as a result of the priority given in Confucian beliefs to protecting and obeying one's seniors. The recent Olympus scandal is investigated to show how Confucian teachings had impacted the Olympus company's accounting and accountability practice when they made significant financial losses in the late 1990s and 2000s. The research findings confirm that from the Edo era to the present day in Japan there has been a reflective relationship between accounting and accountability practices and Confucian values. In light of Japanese aspirations to internationalise their accounting standards and accountability, it is crucial for any Japanese organisation to take these findings into consideration when reviewing internal regulations on accounting and accountability.