Failed firm's execs face huge claim

Tokyo's Nikkei shares index has fallen over the past year

Companies which collapsed during the last economic downturn in Japan are heading for the courts.

The slowdown in the US economy and the fall in stock prices are increasing the uncertainty over the economic outlook

Yoshiro Mori
Japan's Prime Minister

The victim of Japan's second biggest corporate failure has decided to sue its former executives for millions of dollars, a Japanese newspaper reported on Monday.

The insurance company Chiyoda Mutual Life, which went down in 1995, said the former company bosses caused its downfall through irresponsible lending and lax management, a report in Yomiuri Shimbun said.

The victim of another corporate failure, the biggest seen in Japan, is eagerly awaiting the outcome of a court case.

If Chiyoda's trial proves a success, Kyoei Life Insurance is expected to bring similar charges against its own former executives.

The blame culture

The forthcoming court cases are part of a trend where ever more failed firms hold their former managers accountable.

Prime Minister Yoshiro Mori is concerned about the future

In December, the former chairman and another dozen or so executives of the collapsed retailer Sogo were ordered by a court to pay $54m towards losses caused by fraud and lax management.

But atempting to squeeze millions out of former executives will do little to revive the ailing Japanese economy.

Japan's long-awaited recovery from a deep recession remains fragile; the yen is weak and stock prices are under severe pressure.

Prominent warnings

On Saturday, the Japanese Prime Minister Yoshiro Mori warned that the future looks uncertain.

Japanese business leaders warn of sluggish share prices

"The slowdown in the US economy and the fall in stock prices are increasing the uncertainty over the economic outlook," he said at the first meeting of a new government council on fiscal and economic policy.

His warning echoed that of Japanese business leaders who on Friday forecast that the economy was on track for modest growth, but voiced concerns over sluggish Tokyo stocks and the economic conditions in its export markets in the UK and elsewhere in Asia.

Troubled shares

Japan's blue chip Nikkei 225 stock index has lost a third of its value since April 2000 to fall back to levels not seen since the beginning of 1999, when the stock market was near its lowest level.

Tokyo's traders have had a rough year

And the index is unlikely to rise in the near future.

The selling of cross-shareholdings among companies, expected to increase ahead of the closing of book keepers' accounts in March, would cap any significant gains over the next few months, said Daiwa Securities SB Capital Markets' general manager of equities, Kazunori Jinnai.