Accounting, Organizations and Society 32 (2007) 263301

www.elsevier.com/locate/aos

Accountics: Impacts of internationally

q
standardized accounting on the Japanese socio-economy
Tomo Suzuki *

SAID Business School, University of Oxford, Park End Street, Oxford OX1 1HP, United Kingdom

Abstract

This is a case study of the dissemination of internationally standardized accounting to a nation where standardized
accounting was hitherto only loosely practised under domestic conditions. Soon after World War II, a growing interest
in socio-economic management, rather than microeconomic or corporate nancing, accelerated the implementation of
standardized accounting in Japan. In order to make unintelligible delineations of the economy and its constituent rms
comprehensible, ocial and governable, both national and corporate accounting came to occupy an important position
as a formal mode of economic data and management. The actors were the ocials of the Allied Powers, economic stat-
isticians and academic accountants; whose motives, political manoeuvres and consequences are here reconstructed
based on the primary archives of, and interviews with, those who were directly involved in this revolution. The revo-
lution directed new courses of the Japanese economy and rms through the development of statistical habits of
thought. In order to clarify the relevance of this history to todays international accounting issues, a few comparative
references are also made to the recent development and implementation process of International Accounting Standards
and International Financial Reporting Standards (IAS/IFRS).
2006 Elsevier Ltd. All rights reserved.

q
In 1887, accounting Professor Charles Sprague of Columbia Introduction
University coined the word accountics dened as the math-
ematical science of accounting values. This term is not used How did we come to know the Japanese econ-
today, and is nothing to do with Accountics of this paper.
Accountics in this paper is more to do with accounting,
omy and corporations (Thompson, 1998)? Only a
politics and economics the way in which accounting opera- little more than half a century ago, soon after
tionalize political economy (Suzuki, 2003a). In order to the Pacic War, the United States (hereafter the
understand the international and socio-economic aspects of US) occupied Japan with a plan to reconstruct
Accountics in Japan, Suzuki (2003b) would be very helpful, the Japanese economy and industries (Over-all
and readers are recommended to read it in advance of this
paper.
Economic Eects Division, The US Strategic
*
Tel.: +44 (0) 1865 288800; fax: +44 (0) 1865 288805. Bombing Survey, 1946, 1950). However, the US
E-mail address: tomo.suzuki@sbs.ox.ac.uk missions ran into initial diculties. There were

0361-3682/$ - see front matter 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2006.10.002
264 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
no intelligible pictures of the individual compa-
nies, industries and macroeconomy which they
intended to restructure. Today, it is dicult to
imagine such a condition, but the Japanese econ-
omy and corporations were largely a well-kept
secret (Sapir, July 1947, p. 14) at that time. One
of the earliest reports of the Occupation Force
reected this lack of data:
Owing to the lack of relevant statistics for
the time being, for this rst issue of the
Weekly Summary (Weekly Summary of Eco-
nomic Conditions), we have contented our-
selves with mere summary statements
without gures in most cases. We are hoping,
however, to be able to present in due course
more or less complete weekly statistics on
economic conditions of this country, sub-
stantiating our observations with statistical
gures whenever such is found possible
(Research and Statistics Division, Economic
and Scientic Section, GHQ, Allied Powers,
October 2127, 1945, Cover page).
However, the collection of data concerning the
Japanese economy and rms proved to be dicult.
The lack of economic and nancial data was due
not only to the chaos caused by the War but also
as a result of the traditional and intrinsic mode
of Japanese accounting, statistics and manage-
ment. Two years later, Michael Sapir, one of the
ocers of the US statistical mission reected upon
the same problem:
Even before the war Japanese data on corpo-
rate prots were grossly inadequate. The
operations of the Zaibatsu and large family
concerns dominating the industrial, com-
mercial and nancial aairs of the country
were largely a well-kept secret. The corporate
business tax law of Japan is so weakly
designed and administrated that the returns
are of virtually no use for analytical work.
Finally, standards of accounting are notably
lax in Japan; there is no profession of certied
public accountants, no real requirements for
accountability of Japanese corporations to
the stockholders or the government. As a result
there is general lack of uniformity in the con-
cepts and methods used in business accounts
(Sapir, July 1947, p. 14; italics added).1
Nevertheless, within merely ve years of the end
of the War, almost all the important foundations of
both national and corporate accounting were estab-
lished. This included, for instance, the introduc-
tions of the central Statistics Law, the national
accounting framework in the rst Economic White
Paper, the Generally Accepted Accounting Princi-
ples (hereafter GAAP), the rst statutory auditing
based on the Audit Standards, standardized text-
book of double-entry bookkeeping and standard-
ized school curricula, and the Tax reform mission.
Figs. 1 and 2 shows the gure of economic circula-
tion and nancial trend of ve-hundred Japanese
industrial companies, respectively. They illustrate,
for the rst time in Japans history, the overall pic-
tures of the Japanese economy and companies in
such forms. This data may appear primitive by
todays statistical standards. However, they were
a signicant step towards Japans well-known eco-
nomic planning and management which proved to
be the key for the subsequent Miracle Growth.
All of these were made possible through a series
of accounting reforms conducted by a relatively
small number of academics and ocials.
What follows is a reconstruction of this account-
ing revolution through which the impact of inter-
nationally standardized accounting on a nations
macroeconomy is examined from a viewpoint of
Accountics. Accountics (or Political Account-
ing) was a term rst used by Kiyoshi Kurosawa,
the key gure in the series of accounting reforms
below. Although he did not dene what exactly
he meant by it at that time, using a common termi-
nology in economics, Political Economy (i.e.,
management of a national economy by economics
and politics), one can temporally dene Accountics
as the management of a national economy in the
1
This paper utilizes the views of those who were directly
involved in the accounting reform, which does not deny the
possibility of alternative views of others. Accordingly, this
paper does not claim that the reformers views were generally
true in any transcendental sense. The reformers views are
important, however, because they were, at least, the politically
utilized, or sometimes propagated, truth against which the
subsequent reforms were carried out.
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301 265

Fig. 1. Economic circulation. Visualization of companies, industries and the economy: By the end of 1950s, thanks to standardized accounting
data, companies performance was graphed and charted. These were rst used for the analysis of War nance, and later for economic
planning. Eventually, each function of each industry came to be connected in nancial terms, and thus an overall picture of the Japanese
economy came to be presented in a owchart. These marked the modern origin of nancial visualization of corporations, industries and
the macroeconomy. See Suzuki (2003b, p. 504) for the similar visualization of the UK economy, which was perhaps the model of the
Japanese version. Source: NARA, RG 331, Box No. 3027. SCAP Economic and Scientic Section, Programs and Statistics Division.

standardized accounting framework, which tacitly Literature review

enables a certain kind of industrial and economic
policy, which is operable through providing the
public with an ocial epistemic consonance (i.e.,
readily available industrial and economic data
which appear prima facie neutral but are in fact
politically infused. Suzuki, 2003a).
Unlike the traditional and perhaps taken-for-
granted view of representations, Hines (1988)
reected on the role of nancial accounting from
a constructivist viewpoint, through an allegorical
catechism, concluding, We construct reality. In
266 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301

Fig. 2. Financial trend of ve-hundred Japanese industrial companies (see Fig. 1).

the so-called constructivist and relativist literature,
researchers often concentrate on the rhetorical and
constitutive aspects of accounting in organizations
(e.g., Burchell, Clubb, & Hopwood, 1985; Hop-
wood, 1989; Morgan, 1988; Morgan & Willmott,
1993; Robson, 1992; Klamer & McCloskey,
1992). It is stressed that the application of new
accounting can change the visibility of organiza-
tional reality leading to changes in the operation of
the organizations. In some areas of research for
example, public sector accounting, terms such as
visualization and construction have now
come to be substantiated with concrete empirical
evidence and detailed case studies (e.g., Guthrie,
1998; Broadbent & Laughlin, 2002).
In nancial accounting research however,
researchers have rarely analysed the detailed rheto-
ric of accounting in action. With regard to macro-
economic and societal eects that nancial
accounting regulations and practices entail, only
a few have articulated constitutive aspects of
accounting based on detailed empirical evidence
(Bryer, 1993, 2000a, 2000b, 2005; Miller, 1986,
1990, 1994; Miller & OLeary, 1987; Miller & Rose,
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
1990). Recently, Suzuki (2003b) attempted to illu-
minate the history of 1940s Britain, in which econ-
omists and accountants co-operated to develop
national income accounting and corporate
accounting, which quickly turned out to be an
implicit but solid foundation of the Keynesian
macroeconomic revolution (Stone, 1947). The fol-
lowing is a similar case study based on the Japanese
environment in which accounting helped construct
a new economic regime (see Ze, 2003a, 2003b,
2005 for useful history of the US accounting).2
However, Japans case is not just another case
study within the constructivist literature. Japans
case is of particular importance because it clearly
illustrates the process in which the original UK
accounting regime became disseminated through
an international standardization movement: from
Britain, via the US, to Japan. One of the weaknesses
of the constructivist literature was their failure to
explain how accounting, in particular the Anglo-
American accounting framework among the other
alternative modes of economic description, has
grown as an outstandingly popular mode of eco-
nomic administration in the latter half of the 20th
century. In almost all the advanced economies,
standardized accounting has become the most pop-
ular and ocial data of corporations, local and
national governments, and international and supra-
national organizations; notwithstanding that other
modes of economic presentation and discourse had
occupied important positions in economics before
the 1930s (Cairncross, 1988; Bray & Stone, 1948).
In the eld of economics, it is not that Anything
2
One of the reviewers of this paper suggested investigating a
possible case that accounting reform was accelerated by the US
ocials in avoidance of the same mistake in the calculation of
the war reparations in Germany. Certainly it was an important
part of the history in Japan, too. There is a large volume of
documents in the NARA archives which were produced
through the process of reparation calculation based on
government, industrial, and company nancial records. The
result was similar to that of Germany. However, in the
conclusion of the report entitled Preliminary Study on Japans
Reparations, the emphasis was placed on the generous
forgiveness in order to rehabilitate the devastated war econ-
omy, rather than the strict collection based on the accurate
data, which comes in line with the subsequent activities of the
US military to foster the democratic economic forth in Japan
(anon, 1945, p. 16).
267
goes, a symbolic claim by a relativist or anarchist
philosopher of knowledge, Feyerabend (1975) but
Accounting goes (Suzuki, 2003a, p. 90).
Concerned with this accounting as a widely
shared epistemic framework or as a lingua franca
of modern economic and corporate society, we
may direct more attention to the internationally
isomorphic and standardized features of account-
ing rather than relatively minor international dif-
ferences.3 International standardization is a most
obvious but relatively neglected feature of nan-
cial accounting that may have been implicitly
shaping the practices of modern economic and
corporate governance (Hopwood, 1989, p. 14;
Miller, 1986, 1990; Miller & OLeary, 1987; Miller
& Rose, 1990; Thompson, 1998).
In an attempt to theoretically explain the world-
wide diusion of standardized accounting, Suzuki
(2003a) drew upon notions such as numerical nota-
tions, presentational forms of accounts, codi-
cation and regulation, professionalization,
econocrats, and education, publication and indoc-
trination, all of which are considered to collectively
form a self-perpetuating apparatus to promote a
framework of accounting (Suzuki, 2003a, pp. 88
99). This paper further develops knowledge, empir-
ically, as to how these notions and practices have
actually shaped the perception and management
of the Japanese economy and its constituent rms
based on detailed archival evidence and interviews.
From such a perspective, this paper dierentiates
itself from the existing literature on Japanese
accounting that examines the cultural idiosyncrasy
of Japanese nancial reporting. Drawing on
3
There is no contradiction or conict between the research
that examines accounting in the culturally specic settings and
the research that examines isomorphic nature of accounting
across cultures. It is only the purposes and foci of the studies
that are dierent. The isomorphic and standardized here
refer to the similarity common to the form of accounts,
nancial statements, and regulatory framework based on the
notion of accountability and credited ocial uses of accounts
that may have been implicitly shaping the mode of modern
economic governance. In this paper, post-war Japanese nan-
cial accounting is considered to have been standardized to
the degree that business and economic discourses have come to
be practically possible owing to such isomorphism that leads
one to believe that they refer to comparable economic entities.
268 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
detailed commentaries on the regulatory texts and
institutional formation, which are compared histor-
ically and internationally with accounting in Ger-
many, the UK and the US, substantial knowledge
has been accumulated as to why this disharmony
and peculiarity of Japanese accounting has occurred
(e.g., Harrison & McKinnon, 1986; McKinnon,
1986; Fujita, 1966, 1991; Cooke & Kikuya, 1992;
Choi & Hiramatsu, 1987; JICPA, 1984, 1989; Lowe,
1990; Kawamoto, 2001; see Chiba, 1998, 1999a,
1999b, 1999c, 1999d, 1999e, 2001 for detailed illus-
trations and for eorts to demystify the often pre-
sumed relationship between US and Japanese
accounting). Such eorts have been of much interest
for many international accounting researchers and
are certainly successful in their own right. However,
considering the rapid growth of IAS/IFRS in recent
years, more attention should be given to the process
of international standardization and conversion.
In addition, the past achievement entailed some
occasional side eects. For instance, the extensive
commentaries on the regulatory texts may direct
readers to understand Japanese nancial reporting
quite exclusively in relation to the rationale of stew-
ardship and accountability, which can blind them
from wider contexts and other purposes in which
the post-war Japanese nancial system was swiftly
established.4 Instead, this paper shifts attention to
the wider context of socio-economic management
and the underlying pragmatism to realize it based
on standardized accounting. There has been no lit-
erature, whether in English or Japanese, which
articulates the course of post-war Japanese
accounting reforms from a viewpoint of Accountics
which attempted to make Japans socio-economic
4
Risks of research that excessively depends on the literal and
comparative readings of regulatory texts should be clearly
noted. Without a correspondingly detailed examination of
historical context and practice in which modern Japanese
accounting was established, interpretation of regulatory texts
can undermine the understanding of Japanese nancial
accounting history. It should be noted that actual practices
are often dierent from what is supposed to be practised under
a regulation (e.g., pre-war Japanese accounting regulations and
practices). Furthermore, as will be illustrated shortly, even if
Japanese regulatory texts and practices are similar to those of
the US after the War, they may still have dierent social
meanings other than those in the US.
management operable based on internationally
standardized economic and nancial data.
Aim, data and method
By positioning the potential contribution of this
research in relation to the existing literature, the
main objective of this paper should already be
clear in general terms: namely (A) to locate the his-
tory of Post-war Japanese nancial accounting
both in (A-1) the international standardization
context (as contrasted to an international compar-
ative research context or a domestic evolutionary
context), and in (A-2) Japans socio-economic
management context (as contrasted to a micro
nancial and corporate governance context); and
to show altogether how newly developed account-
ing practices have inuenced the course of the Jap-
anese economy and corporations. The primary
aim here is to develop a historical narrative of
the under-researched international accounting rev-
olution which provides detailed empirical evidence
to my previous theoretical work, i.e., the expres-
sionist view, on the roles of nancial accounting
in the economic society (Suzuki, 2003a, 2003b).5
In addition to the broad and historically oriented
objective detailed above, there are three more spe-
cic and policy-oriented points for future research
(B).6 Due to the emphasis this paper places on pro-
ducing an overall account of the revolution, the fol-
5
The development of a historical narrative may appear as a
modest attempt rather than as a major objective of this
research. However, before I thoroughly examined various
archives, the story of international Accountics was totally
unknown to anyone except for those involved in the revolution.
Given such a background, I consider that one of important
objectives of this paper should be to develop an intelligible
narrative of unknown, but important history, and highlight
some of important aspects of the revolution in such a way that
they are made available for future investigations.
6
On this point, I acknowledge with thanks useful comments
from David Cooper, Norman Macintosh, and the anonymous
reviewer B of this journal. Their criticism was that this paper
was rich in historical materials and full of implications, but they
were not well organized in an illuminating way that can be
utilized for existing and future research. Accordingly, the present
paper was re-written to indicate important historical events
particularly in relation to todays IAS/IFRS development.
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
lowing three may suer from insucient analyses in
places. However, they are important to mark the
beginning of a series of future research which are
particularly concerned with the rapid growth of
the IAS/IFRS in recent years. The IAS/IFRS are
a Brave New World a new experiment (Ball,
2005).7 Considering this lack of experience, Japans
history provides a few useful comparative bases.
The three specic points are: (B-1) the process
and impact of international accounting in develop-
ing a new economic regime in a foreign nation;
namely, in Japans case, the transformation from
Imperial, Zaibatsu and Marxist oriented economy
to the democratic and Keynesian macroecon-
omy. This point can be useful in examining the
potential impacts of IAS/IFRS on transitional and
developing economies such as China, where Marxist
economic regime is currently re-shaped in relation
to the market based economy. (B-2) The rhetorical
use of language (B-2-i), and centralized institutional
& legal arrangements (B-2-ii), which enabled a small
number of key actors to gain the power to achieve
swift and fundamental reforms. This point is useful,
for example, to consider the eectiveness of rhetoric
and institutional authorities used by a few powerful
organizations such as International Accounting
Standards Board (IASB). Finally, (B-3) critical
examination of underlying social philosophy of
Accountics which seemed to be internationally
shared to realize various reforms. This can be
compared with the fundamental rationale that sup-
ports the development of IAS/IFRS.
In developing a historical narrative below, the
above points (As and Bs) are signposted to guide
readers to some of the ways in which the grand his-
tory can be usefully interpreted. For instance, the
point B-2-i (the rhetorical use of language) exempli-
es the value of such signposting. B-2-i recurs
throughout Part I and II. If the importance of each
individual case is independently evaluated, they
may appear trivial. However, an important feature
of well-founded rhetoric is that a small number of
7
At the P D Leake Lecture 2005, Ray Ball emphasized that
the implementation of IAS/IFRS has been a Brave New
World: The case for uniformity in accounting is not based on
any settled body of evidence, or literature. . . or academic
research, so, this is an experiment (Ball, 2005).
269
phraseologies are used in many dierent occasions
on the ground that they acclaim very basic episte-
mic, human and social values which are hard to
refute. Rhetoric mysties the persuadee by con-
stantly appealing to the inherently good property
of languages itself such as accuracy, coher-
ence, comparability and democracy, even
when such properties are not really at stake in dis-
cussions. In Japans history, reformers utilized
these languages in many dierent occasions to
avoid various objections which could have over-
thrown their target to implement standardized
accounting. Therefore, the importance of rhetoric
needs to be understood through overseeing recur-
ring usages of particular phraseologies.
The main data for this research is primary
archives of those who were directly involved in the
revolution. Extensive search and examination of
archival data was carried out over a period from
1997 to 2005. Altogether, forty-one days were spent
in archive storerooms, and more than 4100 archive
holders or les were reviewed to develop the narra-
tive of the overall history, and to identify important
documents, which were then either photocopied or
digitally photographed for further detailed analy-
ses. The research has beneted particularly from
the following archives: the post-war US military
and Mission archives at the US National Archives
& Records Administration (NARA in Washington
DC, US) and Ken-sei (Political-Constitutional)
Document Room of the Japanese National Diet
Library;8 the Japanese governmental and ministe-
rial archives at the Ministry of Finance, the Eco-
nomic Panning Agency and the General Aairs
Bureau; the archives at the Japan Statistical
8
Note on the NARA records and citation: In many cases,
documents in the Record Group 311 (Allied Operational &
Occupation Headquarters, World War II) are not accurately
sorted nor indexed, mainly due to the large volume of
documents kept unsystematically (or, at best, loosely-systemat-
ically) during the Occupation period. In addition to this, some
documents seem to have been misplaced, lost or partially
destroyed during the reproduction and preservation pro-
gramme by the Japanese Diet Library (The reproduced
documents are kept in the Ken-sei Document Room). Although
the general guide of National Archives records recommends not
citing the Box numbers in the bibliography, it is the most
reference-friendly index which researchers will nd useful.
270 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Research Institute (Zaidan Hojin Tokei Kenkyu-kai,
Tokyo); Rockefeller Archives Center; and the
Kurosawa Archives at Seikei University, Tokyo.9
The importance of these archives will be claried
not only by analysing the contents of each paper,
but also by synthesizing these collections as a whole
which enables us to develop a narrative of an almost
unidentied international revolution. The author
did not have a priori xed historical narratives in
mind, other than very general anticipations. The
development of the historical narrative was, there-
fore, mainly the outcome of synthetic interpretation
of the above archives, supported by the writings of,
and interviews with, the relevant actors.10 The
9
Kiyoshi Kurosawa (19021990) was undoubtedly the most
outstanding gure in Japanese accounting history. He was
directly involved in the drafting process of the Business
Accounting Principles (i.e., the Japanese GAAP) and the other
central accounting regulations. Up to his death, he remained
active in writing and served important positions such as the
President of the Japan Accounting Association (19641975, and
Honorary President 19821990) and Chairman of the Business
Accounting Deliberation Council (19661980). After his death
in 1990, Kurosawas papers were donated to Seikei University,
Tokyo. As of 1998, although the cataloguing process was still in
process, more than 2000 les and holders were tentatively
classied and stored in the stack room of the Seikei University
Library. The process was directed by Professor Junichi Chiba,
a former student of Kurosawa and now a professor at the
Faculty of Economics at Tokyo Metropolitan University, by
whom the author was introduced to the important documents
at an early stage of this research. In co-operation with the Seikei
University Library, the author had an opportunity, in the
Summer of 1998, to examine materials in the Kurosawa
Archives that were written or published before the 1960s
(Kurosawa Archives, IV). The reviewed documents include
Kurosawas scrapbook, memoranda of the Allied Powers,
minutes of various committee meetings, drafts of regulations,
and drafts of research papers. At the end of this papers
reference list, these papers are indicated as the Kurosawa
Archives.
10
In other words, while the author was examining archives
and interviewing, he was not looking for any evidence to
support pre-set hypotheses or already known stories. Archives
were investigated thoroughly in accordance to the stored order,
rather than retrieving sought after les from a certain point of
view. Only towards the end of the research, there were a few
occasions of searching some evidence to ensure that the
developed narratives are fairly presented but otherwise most
of the time the authors research was much more to do with
nding things out through the painstaking reading of
archives (cf. Miller & OLeary, 1998).
important interviews include those with late Profes-
sor John K. Galbraith (October 2003), late Profes-
sor Tsuru Shigeto (August 1998) and Yoshimasa
Kurabayashi (July 1998 & 2003). Some details of
archival and interview data may appear trivial if
treated in isolation of the overall history however,
they are carefully selected to provide well-balanced
empirical foundations to illuminate the aforemen-
tioned points B-1, 2 and 3, as well as to develop
the narrative of the history as a whole.
Structure of the paper
This paper (Part I) articulates the international
diusion process of the then newly developed
national income accounting regime from the UK
to the US and then to Japan (Point A-1). In the sec-
ond Section, The Introductory Application of
National Accounting to the Japanese Economy,
we address a question of how Keynes arrived in
Japan? The rst application of modern national
accounting in Japan was part of the international
movement to standardize economic statistics in
the framework of Keynesian macroeconomic
accounting. The third Section, National Account-
ing as a Democratic Framework of Economic
Society explains how Keynes gained power in
Japan, where Marxist and socialist academics were
then dominant in both economics and accounting
(Point B-1). In this section, we will also consider
how statisticians developed a democratic econ-
omy under the inuence of English language and
rhetoric such as accuracy, coherence, inter-
national, comparability, and standardization
of economic statistics (Point B-2-i), and based on
the centralized statistical regulations and institu-
tions (Point B-2-ii). The fourth Section, Corporate
Accounting for Macroeconomic Management
explains that the need for corporate accounting
reforms came to be recognized as a microfounda-
tion of macroeconomic data and management
(Point A-2). Similar to the acts of statisticians,
accountants also utilized rhetoric and institutional
arrangements in order to secure the foundation of
swift accounting reforms (Point B-2). The nal
Section, Concluding remarks for Part I summarizes
Part I and considers some important implications
for the future research of IAS/IFRS.
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301 271

In Part II (forthcoming), we shift our attention
to further details of corporate accounting reforms
which was considered to be the microfoundation
of Japans new socio-economic management
(Point A-2). A wide range of reforms was imple-
mented in a very short period of time, led primar-
ily by a relatively small number of key academic
accountants (Point B-2). The rst section, Figura-
tion of large corporations and industries, will high-
light the key actors, recurring political artices,
including utilization of rhetorical language such
as transparency and international standards
(Point B-2-i), and government or supra-govern-
ment institutions (Point B-2-ii), as these were vital
to the swift realization of the then alien rationale
of nancial accountability. The second section,

Exhibit 1
Main actors and synopsis of history
Main actors Development of history and main actors roles
British economists and an accountant
John M. Keynes From the late 1930s, in order to assist with Keynes economic interventionism, Stone and Meade
Richard Stone (Nobel Laureates) and Bray (accountant) worked to create the rst ocial national accounting
James Meade framework (1941). Stone was successful in internationally standardizing national accounting. Bray,
Frank S. Bray on the other hand, tried to reform British corporate accounting to facilitate national accounting, but
he failed. Their attempts served as models for the Americans and the Japanese. See Suzuki (2003b)
for details
US economists and statisticians
Simon Kuznets In the 1930s, Kuznets (Nobel Laureate) calculated US national income, but he was against
John K. Galbraith international standardization of British national accounting. The other economists were supportive
Milton Gilbert of the standardization and endeavoured toward implementing the national accounting regime in
Stuart A. Rice Japan after the WWII. Galbraith and Gilbert were the rst to apply the national accounting
Michael Sapir framework to Japan under the United States Strategic Bombing Survey (USSBS). Rice and Sapir
Carl Shoup recommended overall statistical reform under the Statistical Mission. The Shoup Mission tried to
improve the Tax system through extensive public education, which was considered to be another
foundation of the national accounting system for macroeconomic management
Japanese economic statisticians
Shigeto Tsuru Tsuru (who was known by Galbraith due to Tsurus study at Harvard University) and Takahashi
Masao Takahashi were commissioned to act as liaison ocers between the Allied Power General Headquarters (GHQ)
Hyoei Ohuchi and Japanese Government largely due to their good command of English. Tsuru as a head of
Hitotsubashi-Economists Economic Stabilization Board (ESB) of the Japanese Cabinet later published the rst Japanese
Economic White Paper. Takahashi endeavoured to reform corporate accounting with a view to
generate economic statistics on an ecient and autonomous foundation. Ohuchi, a handful of
Hitotsubashi School Economists, and Arisawa at Tokyo University, led statistical reforms under the
strong inuence of Rice and Sapir, which resulted in disseminating a Keynesian data system in Japan
where Marxists were then still dominant
ESS ocers
Robert Swanson Economic and Scientic Section of GHQ (ESS) ocers, who were in charge of producing economic
William G. Hessler statistics, felt the need for corporate accounting reform in order to improve the quality of statistics.
Frank A. March They helped, rather than forced, the below identied Japanese accountants to implement the US
Emerson Ross accounting regulations. Moss was Chief of Vocational Education Unit of Civil Information and
L. Q. Moss (CIE) Education Section (CIE), and he helped Japanese accountants to establish a powerful committee to
Clarkson Stevens centrally administrate accounting issues on the basis of civil information, education and
democracy
Japanese accountants
Kiyoshi Kurosawa Ueno was an elderly authority in academic accounting that supported Kurosawa. Kurosawa had his
Michisuke Ueno own idea of accounting reform for macroeconomic management. They utilized the political power of
Iwao Iwata ESS, Takahashi and Shoup to swiftly implement important accounting regulations and practices.
Gen Murase The Japanese GAAP was almost single-handedly drafted by Kurosawa. The other accountants
helped Ueno and Kurosawa to draft important nancial regulations such as Audit Standards
272 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Reforms of accounting for SMEs and accounting
education, will illustrate the principal conse-
quences of such reforms in relation to visualizing
companies, industries and the economy as a whole,
which in turn came to be amenable to the Keyne-
sian central economic management (Point A-2).
The third section, Pragmatic philosophy of
accountics, is devoted to clarifying the socio-eco-
nomic philosophy which supported the eorts of
the key academics (Point B-3). The nal section,
Evaluation: making the history relevant to the
IAS/IFRS studies, concludes this research by re-
evaluating this international accounting revolution
from both a historical point of view and in the
context of future research (Exhibit 1).
The introductory application of national accounting
to the Japanese economy
When the Japanese Government accepted the
terms of the Potsdam Declaration in August
1945, thereby bringing the Pacic War to an end,
Japan began its reconstruction as a democratic
nation. This occurred under the Post-war Occupa-
tion policy and indirect rule of the Supreme Com-
mander for the Allied Forces; in eect, the US
military (19451952). To resolve the issues caused
by the unintelligible state of the Japanese economy
and its enterprises, President Truman sent the Uni-
ted States Strategic Bombing Survey (hereafter
USSBS) to secure reasonably accurate statistics
on Japans economy and war production, plant
by plant, and industry by industry (USSBS,
1946; Over-all Economic Eects Division of
USSBS, hereafter OaEED, 1946, pp. iiiiv). John
Kenneth Galbraith (19082006), one of ten chief
executives of the USSBS, focused on the national
economy as an important factor of war potential,
citing as an example, the mortal failure of Ger-
many to act upon the inadequacies of its own
method of national accounting, thus blinding the
country from an ecient use of its available eco-
nomic resources (Interview with Galbraith, 2003;
Okuma, 1961, pp. 157576; Nakayama, 1940).
The US military felt threatened by its own illit-
eracy of the Japanese economy (Over-all Eco-
nomic Eects Division, The US Strategic
Bombing Survey, 1946, passim). Towards the end
of the war, the general sta oce had two polar
views on the war potential of the Japanese econ-
omy: one seeing it as materially short and weak,
the other as wealthy and strong. The latter view
could have cost further thousands of bombs and
lives. After the War, reecting on such problems
of illiteracy, the General Headquarters of Allied
Powers (widely known as GHQ) was particularly
concerned with the unknown proles of Zaibatsu
companies such as Mitsui, Mitsubishi, Sumitomo
and Yasuda, all of which generated very high pro-
duction before and during the war (see Corporate
Accounting for Macroeconomic Management for
the nature of Zaibatsu companies at that time).
For example, in the mid 1930s, three Zaibatsu
companies (Asano, Mitsubishi and Mitsui) pro-
duced 70% of Japans cement, three (Mitsui, Mits-
ubishi and Yasuda) produced 88% of its paper,
two (Mitsubishi and Mitsui) produced 87% of its
our, and six (Mitsubishi, Sumitomo, Mitsui,
Asano, Yamashita, and Ishihara) dominated more
than 50% of its shipping (Tamaki, 1976, p. 49).
The Allied Powers considered that the Zaibatsu
was the core that had established the militaristic
movement in Japan to protect their economic prof-
its. In the section entitled Democratization of Jap-
anese Business, the ESS regarded the Zaibatsu as
follows: The Japanese economy before and during
the war was dominated by the Zaibatsu a few
powerful families, wedded for mutual protection
and advantage with inuential elements of Japa-
nese society who controlled the major part of
the industry, mining, nance and commerce of
Japan, and in large part, livelihood of the people
of Japan (ESS, 1950, pp. 3940). The dissolution
of the Zaibatsu, therefore, became the major
task of the Economic and Scientic Section of the
Supreme Commander for the Allied Powers (here-
after ESS for the Economic and Scientic Section)
(OaEED, 1946, Vol. 1). In the rst months of the
Occupation, 57 members from 11 families were des-
ignated as Zaibatsu, their securities taken over for
disposal and their active participation in responsi-
ble industrial and commercial positions restricted
(ESS, n.d. (c1950, pp. 3940)).
The Research and Statistics Division of ESS was
created in January 1946. Its main task was to collect
and interpret economic statistics on all aspects of
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
the Japanese economy, with a particular focus on
the Zaibatsu companies. For them, [a]ccurate mea-
surement of current national income and gross
national product in Japan [was] basic to an under-
standing of the economy as a whole (OaEED,
1946, p. 97). However, statistics that covered signif-
icant enough proportion of Zaibatsu companies
were not available, compelling the ESS to consult
individual company records in order to obtain a
set of gures depicting the most important events
in Japans war economy with reasonable accuracy
(OaEED, 1946, p. 97). On reection, a directive
(SCAPIN 1337-A) was issued 27 May 1946 direct-
ing that the Imperial Japanese government instruct
government and private business organizations to
make available to ESS such economic data ESS
may [have] require[d] (ESS, 20 June 1946, pp. 121).
In this way, both national and corporate
accounting gradually came to be the focus of the
US ocials. In order to quickly establish the
accounting data of the Japanese economy, Milton
Gilbert, a leading American economic statistician
in charge of the national accounts at the Depart-
ment of Commerce, was appointed Chief of
OaEED (OaEED, 1946, p. 1).
The appointment of Gilbert should be under-
stood in the context of international standardiza-
tion of the then newly developed framework of
macroeconomic accounting (Point A-1). Suzuki
(2003b) has already examined the modern origin
of internationally standardized national account-
ing. In 1941, John Maynard Keynes and Richard
Stone (Professor of Accounting and Finance at
Cambridge University and later Nobel Laureate)
inaugurated modern ocial national income
accounting in the UK. A research-minded practic-
ing accountant Frank Sewell Bray helped Stone in
attempting to standardize and reform corporate
accounting to facilitate national accounting. Stone
was the key gure in developing, standardizing,
and internationally disseminating UK national
accounting through institutional meetings such as
the Tripartite Discussion between Britain, Canada
and the US in 1944 (Denison, 1947; Gilbert &
Stone, 1954), and the League of Nations meeting
in Princeton in 1945. In the Tripartite meeting in
1944, Milton Gilbert was the representative of
the US government who came to agree with Stone
273
that national accounts should be standardized. In
1945, Stone also drafted a manual of national
accounts at the League of Nations which became
the bible of national accounts for many coun-
tries. The establishment of the new accounting
framework was an implicit, but solid foundation
of the Keynesian macroeconomic revolution.
In turn, the US development of national
accounting, and the role of Gilbert in this process,
requires further explanation. In the US, Simon
Kuznets, another Nobel Laureate, is often consid-
ered to be the father of modern national accounting.
However, he was in fact against the accounting
framework. (Kuznets, 1933, 1941, 1948; Kapuria-
Foreman & Perlman, 1995; Perlman & Marietta,
2004; Suzuki, 2005). Kuznets was a pioneer in
developing unprecedented economic statistics, but
he also opposed xing economic statistics institu-
tionally and internationally within the framework
of accounting. His argument was that, theoretically
speaking, dierent kinds of economies, such as
Marxist or socialist oriented economies as con-
trasted to capitalist economies, or family based
economies as contrasted to industrially developed
economies, would be best represented through dif-
ferent statistical frameworks. Instead, it was Gil-
bert, once Kuznets graduate student, who took
over Kuznets role at the Department of Commerce
in the early 1940s, who pursued the institutional and
international standardization and operationaliza-
tion of the Keynesian national accounting regime
in collaboration with Stone (Denison, 1947; Gilbert
& Stone, 1954). Gilbert did not follow Kuznets, not
for any academic or theoretical reasons, but for
political, institutional and pragmatic reasons. In
an interview with the author, Galbraith conrmed
the now forgotten roles played by Gilbert in dissem-
inating the Keynesian national accounting frame-
work in the US and Japan.11 In 1945, Galbraith as
one of Chief Executives of the USSBS and Gilbert
as the Chief of OaEED, were among only a small
number of the US economists who regarded Keyne-
sian economic management positively at that time.
11
It is interesting that you reminded me his name. His
contribution has now been forgotten. Interview with John
Kenneth Galbraith (Interview, 2003 at his home, Cambridge,
MA, USA).
274 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Gilbert demanded that the Japanese Finance
Ministry submit all statistical data in accordance
with the format laid down by the US Department
of Commerce (Nakamura, April 1958, p. 72, Nov.
1958). The Japanese government had to comply
directive SCAPIN 1337-A. The USSBS, however,
still faced serious diculties in collecting data for
national accounts. At the beginning of the Survey,
language barriers resulted in major diculties
(Over-all Economic Eects Division, The US Stra-
tegic Bombing Survey, 1946, p. 84; see also the sec-
ond Section of Part II, Figuration of large
corporations and industries). In attempting to nd
a solution to this problem, GHQ sought men tal-
ented in both language and economic statistics. Shi-
geto Tsuru (19122006) was the rst to be
appointed to the position of Economic Advisor to
the GHQ. It was his networking amongst American
economists including Galbraith, established during
his college life at Harvard, alongside his linguistic
and statistical ability, that prompted the GHQ to
employ him as their agent (Galbraith, 1975). Later,
Masao Takahashi (19011995) was appointed as
another liaison agent between the US ocials and
the Japanese statisticians. His appointment was
based equally on his good command of English
and knowledge of economic statistics (Ohuchi,
1995; Economic Society of Kyushu University,
1965).12 It was these two Japanese economists
who led the initial reforms of Japanese statistics
and, as will be demonstrated, these reforms even
aected corporate accounting (Rice, 1947, p. 2;
Sapir, July 1947, Introduction). It is worth noting
here that the employment of the two talented Eng-
lish speakers was not simply a matter of technical
translation or bilaterally fair communication
between the Americans and the Japanese. English
language as a basis of communication inuenced
the mode of knowledge transfer between the Amer-
12
Since he lost his parents at a very tender age, an English-
speaking missionary had brought him up. In his early school
days, he worked part-time at a cinema where English lms were
screened. This developed his ability to communicate in English
(Nakamura, 1998). He went on to the University of Tokyo,
reading Marxist economics and statistics under the supervision
of Hyoei Ohuchi (see the later Section, National accounting as a
democratic framework of economic society for details). Later,
he served as Professor of Economics at Kyushu University.
icans and the Japanese in the way that the former
secured tacit, but fundamental negotiation power
based on English language (Point B-2-i).
Another problem was the lack of raw data
required for national accounts. During the war, all
kinds of Japanese statistics were treated as secret
and available only within a few bodies of central
government. Immediately after the Potsdam Decla-
ration, the Japanese ocials set re to almost all the
important statistics, which were burnt in the yards
of many governmental buildings because the o-
cials were trying to hide the data from the wartime
enemy about to occupy their nation (Zaidan Hojin
Tokei Kenkyu-kai, 1958, p. 500; Yamanaka &
Kawai, 1950, p. 624; Morita, 1980, p. 121).
Thirdly, even if some raw data existed, the unit
of measurement employed was inadequate for the
purposes of the USSBS. A survey of pre-war and
wartime archives in ministries such as the Cabinet
Planning Board, the Cabinet Bureau of Statistics,
the Total Mobilization Bureau of the Munitions
Ministry, and the War and Navy Ministries, shows
that physical units of measurements signicantly
dominated government statistics (e.g., Okura-sho,
19461947; Zaidan Hojin Nihon Tokei Kenkyu-
sho, 1962; OaEEd, 1946 & 1950, p. 1). Dai for
tanks and vehicles, seki for ships, nin for labourers
and troops, koku for grains, ton, kilo, gallon, bar-
rel, etc., were amongst the most frequently used
units (see also Fig. 6 in Part II). Due to the scarcity
of material resources followed by unmanageable
ination during the war, the importance of physi-
cal unit measurement seems to have overridden the
importance of monetary measurement. In addi-
tion, since the importance of central planning
and the general equilibrium of the economy, as
opposed to partial or sectional equilibrium, were
not properly recognized, the nancial re-evaluation
of each physical measure seemed to be of only sec-
ondary importance (Naikaku Chousa-kyoku,
1945; Nakayama, 1940, pp. 3689). In order to
generate an overall prole of the Japanese
economy, therefore the USSBS had to call for
the guration of the divergent types of eco-
nomic transactions in nancial terms for the pur-
pose of aggregating dierent sectors of the
economy (see Suzuki, 2003a, pp. 834 for the
aggregation).
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
This nancial reconstruction of the Japanese
economy involved much labour and guesswork;
[I]t seemed preferable to begin anew with the
source data than to attempt to adjust the [existing
Japanese] ocial estimates (OaEED, 1946, p. 83).
The OaEED Report pointed out a particularly seri-
ous decit of inventory data: it must be noted that
the Japanese estimates do not include at any time
for the change in business inventories. This exclu-
sion was not a conceptual one but was due to the
lack of even reasonably satisfactory data on inven-
tory movements (OaEED, 1946, p. 83). Two years
later, in late 1948, when a survey was conducted
focusing on the expenditure side of national income,
the same deciency was still present: the estimate of
inventories were almost impossible due to the lack
of raw data (Keizai Kikaku-cho, 1992, p. 6). In
order to acknowledge and problematize these de-
cits alongside the general unreliability of raw data,
Appendix C was attached to the OaEED Report.
The collection and collation of economic sta-
tistics which would provide an accurate pic-
ture of the economic development . . . was
much more dicult to accomplish than one
might have thought. The coverage as well
as the quality of economic statistics in Japan
is highly unsatisfactory. Japanese statistics
are contradictory, based on unreliable raw
material, and the method of collection of
basic information is greatly decient. . . .
The statistics used by the Survey had, there-
fore, to be built up from scratch (OaEED,
1946, Appendix C, p. 97; emphasis added).
It was in this context of macroeconomic data
construction that the need for standardized cor-
porate accounting and regulation came to be rec-
ognized as a micro-foundation of macro-data
(Point A-2).13 This is an important point for cur-
13
The lack of reliable economic and nancial statistics was
constantly pointed out from the beginning of the ESS investi-
gation as the most severe setback of their investigation (e.g.,
Bogdan & Tamagna, 1946). One of the most signicant public
propaganda actions for the improvement of economic statistics
was made by Emerson Ross, Chief, Research and Statistics
Division of ESS for the Delivery at a Civil Information and
Education Conference for the Japanese Press on Friday 22
August 1947 (Ross, 1947).
275
rent accounting researchers to note, because cor-
porate accounting issues are currently examined
quite exclusively in relation to micro-corporate
nancing and the eciency of nancial markets
rather than management of the national economy
as a whole. History shows the potential impacts
of corporate accounting on fundamental macro-
economic issues and, as we will see below, much
wider social ones. This implies, for those who
examine the cost and benet of implementing
IAS/IFRS in developing and transitional econo-
mies, that they should consider the so-far unex-
plored impacts of internationally standardized
corporate accounting. Namely, its impact on the
management of a socio-economy as a whole could
be more important than the development of e-
cient nancial markets. The subsequent develop-
ment of Japans example suggests some further
key points for examination.
In early 1946, Gilbert eventually succeeded in the
compilation of data into balanced national
accounts. The Allied Powers came to rely on them
to help set the Occupation policy and operations
in the Japanese economy. However, this does not
mean that the data was accurate. According to the
OaEED Report published in 1946, Government
Expenditure one of the main objects of the
OaEED and Keynesian macroeconomic analysis
occupied 48% of total expenditure estimated at
39.8 billion in 1944 (OaEED, 1946, p. 84). How-
ever, in the Japanese draft printed in March 1947
it was shown that, in December 1945, these gures
were estimated to be 46% and 46.5 billion respec-
tively (Okura-sho Rizai-kyoku, March 1947). A
great deal of reassessment was carried out after
December 1945 when the USSBS returned to the
US.
Given the unreliable sources of data and the re-
assessment exercises revealed above, knowledge of
the Japanese economy seemed to have originated
from the familiar form of national accounting
as well as from the substance of it. The data was
prima facie accurate by denition; due to the use
of balancing factors as such a form of accounts
must balance (see Suzuki, 2003a, pp. 834 for the
roles of the form; Suzuki, 2003b, p. 497 for
the same point in the UK Keynesian Revolution).
Once the gures were published in the balanced
276 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
accounting form, however, the Allied Force o-
cers could be condent of working in a framework
from which a familiar picture of the macroecon-
omy emerged. The accounting helped the emer-
gence of an, at least prima facie, balanced,
coherent, and therefore intelligible picture of the
Japanese economy, which veiled all the diculties
of the language barrier, shortage of raw data, lack
of standard data collection process and inconsis-
tency between data. Since then, the course of
future economic events came to be projected using
such accounting as an epistemic and management
framework.
Thus viewed, the signicance of the USSBS can
be summarized in the following three ways. Firstly,
that the implementation of national accounting
was conducted in the context of international stan-
dardization of national accounting. The new
epistemological and management framework did
not come into existence through an indigenous
evolutionary process. There were also a few key
economists who actively pursued international
standardization of economic data, using their inter-
national institutional positions.
Secondly, the data started being collected in the
form of accounts that conventionally required
nancial revaluation of data. In the UK, James
Meade, who collaborated with Stone to inaugurate
modern national accounting, claried that the col-
lection of manifold data was essentially a question
of central economic planning and this required
the translation of real factors into nancial
terms (Meade, 5th December, 1940, p. 100). Only
with the nancial terms as a common unit of
measurement for dierent factors of the economy
can national accounts be constructed, and thereby
the Governments central planning pursued.
American economists such as Galbraith and Gil-
bert initiated the nancial guration of the Japa-
nese economy after the War. Chifuyu Masaki
translated the OaEEDs national accounts into
Japanese in 1950 (OaEED, 1950). As only the
ashes of the previous statistics remained, this
became the sole common source of information
for economists investigating the wartime Japanese
economy and the subsequent growth. This proved
to be a key point in history, as the Japanese econ-
omy became recognized and analysed within the
framework of nancial accounting. This nancial
data collection, in turn, began moulding the way
in which the Japanese economy emerged in the
public eye as well as in the political economic
discourses.14
Thirdly, the collection of economic data became
the central focus of the Japanese government
(Point B-2-ii). In fact, not only in Japan but also
in many countries, the history of ocial nancial
data collection is remarkably short. In the UK,
for example, systematic and continuous collection
of data were publicly recognized only after 1941
when James Meade and Richard Stone published
the national accounts in the rst British White
Paper (HMSO, 1941). Meade insisted that we
(Keynes, Stone and Meade) should strongly urge
that this work (construction of national account-
ing) should now be undertaken by our sta,
namely by ocials in the government (Meade,
05/12/1940, p. 100; Additions in parentheses by
Suzuki). Until then, national accounting, or eco-
nomic statistics, were largely an endeavour under-
taken by individual academics, most notably Lord
Stamp and Colin Clark (e.g., Stone & Stone, 08
January, 1938; Stone, 1949). In 1938, Stone had
to appeal that [t]he task of gathering information
however is far too great for one man alone, and its
importance in the national well-being should be
suciently to secure its adequate attention (Stone
& Stone, 08 January, 1938, p. 23). The same was
true in Japan (Ohashi, 1961, pp. 194201), and it
was the external force of the USSBS in Japan that
directed the departments, as opposed to individual
academics to collect economic data. This opened
up potential for the government economists or
econocrats to manage the national economy
centrally through their control over ocial
accounts (Suzuki, 2003a). In short, the USSBS
14
This point can be further supported by a very early report
titled A Preliminary Study of Structure of Japans industries
viewed from National Income, in which fairly detailed
analyses and plans to support 80,000,000 peoples lives are
scholarly articulated in terms of national income and its break
downs by industries. At an early stage of the Occupation, the
major concern of the Allied Power was the survival of
80,000,000 people, which required 13,220,000,000 yen to be
realized by the various industries (anon, 1946).
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
contributed to introducing a new macroeconomic
framework in which econocrats were able to
gain the power to control the national economy
based on internationally standardized national
accounting.
In order to generate this nancial picture of the
Japanese economy, the USSBS had to start from
fragmented individual business records. However,
company data was utterly unreliable, and this lack
of trust in statistical data led the GHQ to request
the help of the Statistical Mission from Washing-
ton in October 1946. The correction of these inad-
equacies in business records eventually accelerated
corporate accounting reform from 1948, with
assistance from the Statistical Mission and their
Japanese agents such as Tsuru and Takahashi. It
is to this which we now turn.
National accounting as a democratic framework
of economic society15
The preceding Section may have given an
impression that the Japanese were totally unaware
of the deciencies of their statistics, but this was
not the case. There was a group of academic statis-
ticians who collaborated under the leadership of
Hyoei Ohuchi an elderly authority at Tokyo Uni-
versity. The group included Takahashi (see above),
Arisawa, Takano, Morita and Minobe most of
them aligned themselves closely with what might
15
A Japanese term, Minshu Shugi is usually translated as
Democracy in English. Minshu Shugi is certainly one of
the key concepts in examining the process of Japans economic,
political and social transformation after the War. Minshu
Shugi appears frequently throughout the above mentioned
archives. Thus, the relationship between Minshu Shugi,
statistics and accounting can be an important research topic,
particularly when one is interested in the roles of statistics and
accounting in todays transitional and developing economies
such as China and Russia. Nevertheless, Minshu Shugi is not
dened in a precise way in this paper, other than being
translated as Democracy. This is partly because even this
translation to Democracy can be misleading once readers
started thinking of the details of Minshu Shugi in English.
The notion and rhetoric of Minshu Shugi require extensive
examination which goes beyond the scope of this paper that
purports to outline the overall history of the accounting
revolution.
277
be called the Hitotsubashi School of Economic Sta-
tistics (Zaidan Hojin Tokei Kenkyu-kai, 1958, pp.
499500; Morita, 1980; Ohashi, 1961, pp. 216
7).16 They were sometimes called the Social Demo-
crats because of their socialist or Marxist (although
non-autocratic) thoughts. Before the War, in 1938,
the Police captured Ohuchi, Takahasi and Arisawa,
arresting them and other popular front academics
at the wish of the Government, which insisted that
their democratic ideas were against the established
regime (Ohuchi, 1995, pp. 23). After the War,
freed by the GHQs occupation policy of democ-
racy, the Social Democrats resumed an active part
in academia. They volunteered, despite no pecuni-
ary rewards, to contribute towards the statistical
reconstruction of the Japanese economy (Morita,
1980). The GHQ, for their part, trusted these social
democrats primarily because they strongly opposed
the pre-war militaristic movement (Morris-Suzuki,
1989a, p. 17).
In early 1946, Douglas MacArthur, General of
the GHQ, personally advised Prime Minister Yos-
hida to urgently improve the quality of statistics
(Morita, 1980, pp. 1223). In July 1946, Hashii
and Yamanaka were appointed to the positions
of chief and deputy chief respectively of a newly
established Statistics Research Section of the Cab-
inet Bureau. As the GHQ demanded a more fun-
damental reform of ocial statistics, the
representatives sought help from academic statisti-
cians (Morita, 1980, pp. 123). Yoshida requested
Ohuchi and Takahashi join the Cabinet in May
1946, but they declined. Yoshida then asked Tak-
ano the most venerable and elderly authority in
statistics at that time to persuade Ohuchi and
Takahashi to change their mind.17 However, Tak-
ano suggested setting up a centralized institution
of statistics rather than appointing Ohuchi and
Takahashi as ministers (Zaidan Hojin Tokei Ken-
kyu-kai, 1958, pp. 5037; Morita, 1980, p. 123).
Yoshida accepted this suggestion, and in return
Ohuchi and Takahashi agreed to lead the new
16
To today, Hitotsubashi University has a strong tradition in
studies on commerce and economic statistics. Shigeto Tsuru
was also attached to the University.
17
Generally speaking, seniority commands respect in the
Japanese academy and Japanese society.
278 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Statistical Committee in August 1946 (Kakugi,
1946).18
The US urged the Japanese Government to cen-
trally plan economic recovery. In accordance with
the ESS report, An Economic Programme for
Japan (ESS, 3 May 1946), the Economic Stabil-
ization Board (hereafter ESB) was established as
the highest authority in the Cabinet in August
1946. The Statistical Committee fully backed the
ESB by providing them with economic and nan-
cial data, and the ESB supported the Committee
by promoting it as a solid central institution con-
trolling all phases of ocial statistics (Point B-2-
ii; Morita, 1980, pp. 1237). In October 1946, the
Committee recommended the establishment of
the Statistics Law as a centralized fundamental
law concerning statistics, in order to provide legal
foundations necessary for the new statistical
framework (Committee on Improvement of Statis-
tics System, Oct. 21st, 1946, p. 5).
As a result of these new institutional reforms,
Japanese economic statistics started being col-
lected under the powerful authority of the Prime
Minister, the Statistical Committee and the central
Statistics Law, which provided an epistemic and
empirical tool for the operations of the ESB. It
should be noted, however, that it was not until
one year after the end of the War before the Statis-
tical Committee and Statistic Law were established
(cf. the case of the Accounting Committee and the
Accounting Law in Part II, Section, Accounting
for SMEs and accounting education). Initially,
the signicance of statistics in the successful recov-
ery of the Japanese economy was only partially
understood, and therefore was not rated as a top
priority amongst Japanese politicians. It was not
until the Cabinet came under the supervision of
GHQ that the former recognized the need to set
up the Statistical Committee. Economic data,
which is by now ubiquitous in advanced econo-
mies, did not exist, other than through manual
construction. It was a matter of learning for the
Japanese, and as such the Japanese required
18
Sometimes translated into English as Committee for
Statistical Systems Improvement or Cabinet Committee on
Statistics.
strong support from the Occupation force (Point
B-2-ii).
On the part of the US, GHQ requested that the
War Department send an expert mission on eco-
nomics and statistics in October 1946 (Committee
on Improvement of Statistics System, 1946, p. 127;
Rice, 1947, p. 1). In response to the request, the
First Statistical Mission (i.e., Stuart A. Rice Mis-
sion) arrived in Tokyo in December 1946, and
started collaborating with the above Japanese eco-
nomic statisticians. The Mission was sent to
reform statistical procedure of the Japanese gov-
ernment. More concrete aims were to enhance
accurate national income estimate with scientic
sampling techniques, to implement production
and income distribution census, and to prepare
for various indexes such as industrial index, price
index and consumer index. The GHQ also
requested that Mission give advice on a nancial
reporting system as a microfoundation of macro-
economic management, considered to be one of
the missions most important tasks (Rice, 1947,
p. 1).
Following the USSBS experience, the Mission
also found the Japanese statistical system very
primitive when compared to that of the US where,
Rice considered, the Government and people are
probably more statistically minded than any
others in the world (Rice, 1947, p. 3). What was
dierent from the USSBS is that Rice was prepar-
ing to fundamentally transform the Japanese men-
tality, not merely as a matter of international
trend, but also as a matter of the development of
democratic economic force:
[t]he most basic need of Japanese statistics in
the Missions opinion, is the development of
statistical habits of thought among the Japa-
nese people. It should become part of their
second nature to think of statistics as
short-hand methods of summarizing the
social and economic realities by which they
are surrounded, preliminary to bending these
realities to human requirements (Rice, 1947,
p. 9; italics added).
Rice was a sociologist as well as a statistician at
the University of Chicago. As articulated in his
Quantitative Methods in Politics (1928) and Statis-
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
tics in Social Studies (1930), his expertise was
quantitative social epistemology. Until today,
Rices contribution to the re-construction of the
Japanese economy and society seems to be signi-
cantly under recognized. His recommendation was
critical in transforming hitherto the Imperialistic
into the democratic based on statistical habits of
thought (Point B-1). Rather than worshiping the
Emperors voice, the public were re-educated to
be conscious of their social and economic sur-
roundings through the medium of statistics. In
order to utilize this social epistemology as a foun-
dation of social management, the Mission sup-
ported the Statistical Committee in its eorts in
promoting the status of statisticians (Rice, 1947,
pp. 1112), to programme educational curricula
at schools and on the job (Rice, 1947, pp. 17
23), and to strengthen the legislative procedure
for overriding control of statistics (Rice, 1947,
pp. 2733; Sapir, July 1947, p. 4). These events
prompted the beginning of a grand social reform
that aimed to full the Missions goal of construct-
ing a centralized economic and nancial data sys-
tem (Rice, 1947, p. 27).
The centralized system did not simply mean a
single statistical institution in the Cabinet. It cre-
ated a new framework of government accountabil-
ity, one modelled on the British statistical
framework (Point B-2-ii), as Rice considered the
UK Central Statistical Oce as an example of a
highly satisfactory system of public accountability
(Rice, 1947, p. 6).19 Unlike the Japanese Govern-
ment which concealed data during the war, the
UK Government published the rst White Paper
on its economy in 1941 to disclose the details of
its economic state (Stone et al., 1999; HMSO,
1941).20 In the process of democratization after
the War, Japanese statisticians were of the opinion
that this British system of disclosure was an ideal
framework to connect both individual economic
activities with the role of central government,
and also to obtain public consensus on economic
19
Rice considered the US system less satisfactory as it was not
centralized in comparison to the UK system.
20
In fact, even during the war, the UK White Paper was
brought into Japan, translated, and studied by the Finance
Ministry (Okura-sho Somu-kyoku, 1944).
279
policies (e.g., Yoshida, 1974, p. 267). In June
1947, the Ministry of Foreign Aairs circulated a
memorandum, pressing for the need for the White
Paper and the need for a public consensus
(Gaimu-sho, 1947). These insistences may sound
trivial or even absurd at present, since such
requirements are now taken-for-granted. How-
ever, for those people who had been previously
suppressed under the Imperial regime, they were
revolutionary indeed. In 1951, Tsuru eventually
published the rst Japanese Economic White Paper
(commonly known as Tsuru White Paper) based
on the rationales of public accountability, report-
ing, and public consensus, which were considered
by the contemporary Government to be the basic
form of democratic economy (Point B-1; The
Government of Japan, 1951).
In order to develop this idea from conception to
implementation, further expert help was called for.
In early 1947, Michael Sapir a member of the
Rice Mission, directed Japanese academics and
ocials to try and arrange accounts in accordance
with the methodology of the US Department of
Commerce, which was by then standardized with
that of the British (Tsuru et al., 1954). Alongside
Galbraith and Gilbert, Sapir was another econo-
mist inspired by the Keynesian economics prac-
ticed by the US government in the early 1940s.
He was an economist in the Budget Bureau, and
often participated in the Conference on Research
in Income and Wealth an internationally inu-
ential conference organized by leading national
accounting scholars such as Richard Stone (Point
A-1; See Suzuki, 2003b, p. 500).
Sapirs practical directorship of Japanese statis-
ticians had signicant impacts on the future course
of Japanese economics, research of which is again
so-far entirely missing. There was a critical
moment in Japans history when seemingly neutral
accounting was actually shaping the knowledge of
both Japanese economists and the public at large.
At an early stage, some discussions were held
between the US economic statisticians and Japa-
nese statisticians such as Tsuru, Takahashi, Ohu-
chi, and many others who had Marxist or
socialist backgrounds. As has been pointed out
regularly, Marxist ideas were signicantly inuen-
tial, if not dominant, in Japanese academia at that
280 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
time. Takafusa Nakamura, who co-authored a
monograph of national income accounting with
Hiromi Arisawa at Tokyo University, recollects
that economists seriously discussed whether or
not national income accounting was necessary in
Japan. In the 1940s and 1950s, approximately
90% of students and professors preferred and stud-
ied Marxist economics, as opposed to Modern
Economics (Nakamura, 2003; Arisawa & Naka-
mura, 1956). The theme of discussion encom-
passed the type of statistical framework which
would best t the Japanese economy of the time.
The Japanese expressed their frustration with the
fact that [t]he group of Federal government econ-
omists whose forecasts (model projections)
under review [were] Keynesians in methods of
analysis and in general philosophy (Sapir,
November 1946, p. 8; See The Introductory Appli-
cation of National Accounting to the Japanese
Economy above). Indeed, as Sapir explained, In
approaching the task of analyzing the economic
outlook for the transition period, it was most nat-
ural to operate in terms of the over-all system of
economic relationships developed by Keynes and
subsequent writers. . . The general framework for
the analysis [was] usually some set of gross
national product national income accounts. . .
The econometric model employed by the Washing-
ton forecasters in mid 1945 [was] the simplest type
of Keynesian model (Sapir, 1946a).
Despite the fact that Marxist thoughts were so
popular in Japanese academic circles and also
social democrats were the key actors in the reforms
of economic statistics, neither a Marxist nor a
socialist statistical framework was ever realized
in practice, the process of which is symbolically
illustrated in the episode below (Point B-1).21 In
1946, Sapir gave a lecture on the signicance of
national income accounting to the leading and
most active Japanese economists and economic
statisticians. His lecture script reads:
21
My review of early research papers (19451955) at the
Ministry of Finance, the Economic Planning Agency, the
General Aairs Bureau, and the Japan Statistical Research
Institute (Zaidan Hojin Tokei Kenkyu-kai, Tokyo) shows that
more than a half of the research papers and activities were on
Marxist or socialist statistical systems.
. . . development of Keynes theory. He wrote
a well-known treatise titled The General
Theory of Employment, Interest and
Money which has favourably contributed
for national income problem to be brought
in the very center of economics, statistics
and of various policies. We are living in the
midst of Keynesian Revolution of Econom-
ics. As to myself, I may be say 70% or 90%
of Keynesian School (sic.; English in Origi-
nal; Sapir, M. Research and Statistics Divi-
sion, ESS, n.d. (April 1946), p. 4).
At this point, departing from the Japanese social
norm, i.e., being overly polite and quiet, Ohuchi
suddenly interrupted Sapirs lecture:
(Prof. Ouchi [sic] spoke up concerning the
Keynes theory, saying We once had a
chance to discuss the Keynes theory with
Mr. Sapir. Generally speaking, however, it
has remained rather unpopular in this coun-
try, and particularly so in our University
(Tokyo University)) (Sapir, n.d. (April
1946?), p. 4; Parenthesise in original).
In replying to Ohuchi, Sapir did not address his
main point, however. Instead, he appealed to the
international trend of standardization of
national accounting to defend his position in dis-
seminating a national accounting framework:
Anyhow, idea, method, denition and analy-
sis of national income have become very, and
perhaps most popular in the United States.
Mr. Kuznets is called Father of National
Income Theory. This is also true with Eng-
land, Canada and some other counties in
Europe . . . (Sapir, M. Research and Statis-
tics Division, ESS, n.d. (April 1946?), p. 4).22
Sapir emphasized that this international trend
was not reversible and that standardized
22
As explained earlier, Kuznets was against Gilberts national
accounting framework. However, during the War, Kuznets
accepted the UK national accounting framework, as govern-
ment control of the war economy based on its expenditure was
of foremost importance in comparison to the other possible
purposes of national income calculation (see Kapuria-Foreman
& Perlman, 1995; Perlman & Marietta, 2004; Suzuki, 2005).
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
accounting data would benet Japan, which some-
what mystied the Japanese statisticians, causing
them to back-o. Sapir further persuaded the Japa-
nese that one of the essential benets of the account-
ing framework was the accuracy, coherence
and comparability of data. He also advocated
that double-entry accounts [were a] highly fruit-
ful and illuminating form for the dierent sectors of
the economy business, agriculture, the consumers,
government, etc. (Sapir, July 1947, p. 6). If the data
[were] prepared in the form of accounts, there
[would always be] a system of checking the coher-
ence of available data (Sapir, July 1947, p. 9). The
other advantage, Sapir insisted, was the benet of
being a member of the newly emergent interna-
tional community (Sapir, July 1947, p. 2) based
on internationally standardized accounting. In or-
der to join the membership of international organi-
zations such as World Bank, the International
Monetary Fund, the I.L.O., UNESCO, W.H.O.,
I.C.A.O. and others, the use of standardized na-
tional accounting was stipulated as a necessary pre-
condition (Rice, 1947, p. 6). In order to reach the
international standard of national accounting, Sa-
pir recommended the acquisition of voluminous
literature that . . . appeared on national income
problems during the last few years especially in
the United States and England in Japanese li-
braries (Point A-1; Sapir, July 1947, p. 3).
Sapirs statement was not entirely truthful,
however. There were only a relatively small num-
ber of economists who understood the implica-
tions of the national accounting framework at
that time (Interview with Galbraith, 2003, Cam-
bridge, MA, USA). As Galbraith stated elsewhere
and reconrmed in an interview with the author,
even in the US, Keynes was as unpopular as Marx
at that time:
Professional business leaders appearing
before the Congress had no hesitation in
attacking Keynes. Certainly he must rank
with Marx and Lenin. But they did not attack
the accounts or the projections. These could
not similarly be so condemned. A case could
easily be made from those days that statistics
were more subversive than words (Galbra-
ith, 1980, p. 80, parenthesis added).
281
The idea of Keynes and national accounting ar-
rived in the US in the 1940s; Keynesian economics
was penetrating the US economy by means of
accounting and statistics employed by a few key
economists in federal government oces, such as
the Bureau of the Budget and the Department of
Commerce. In this process, national accounting
appeared unproblematic, or at least less politically
infused, when compared to Keynesian economic
principles per se, which turned out to be an eec-
tive rhetoric to implement the Keynesian frame-
work (cf. Suzuki, 2003a, pp. 8088; Suzuki,
2003b, pp. 485498 for a specic case in the British
Keynesian Revolution.). Equally, in Japan, a sim-
ilar phenomenon was taking place. The non-Marx-
ist or socialist statistical framework was about to
be implemented based on the eective rhetoric of
accuracy, coherence, comparability and
international standards. These languages mysti-
ed Japanese economists by constantly referring to
the denitional rightness of this phraseology, and
Marxist economists seemed to lose the opportunity
for eective discussion (Point B-2-i).
This powerful rhetoric of international stan-
dardization had already become an international
strategy in May 1946. Sapir, Rice (Bureau of the
Budget), and E. M. Doblin (US Department of
Commerce) submitted a report to the Economic
and Social Council of the United Nations, entitled
Working paper on the status of national income
statistics, in which the necessity of the interna-
tional standardization was one of the major agenda
(Rice, Sapir, & Dolin, 1946). Theoretically, they
questioned the appropriateness of standardized
national accounts for economies under dierent
regimes and conditions; for instance, economies
in which Marxist thoughts were popular, or where
family based businesses were prevalent. What fol-
lowed was, however, a pragmatic implementation
of standardized accounting to the League of
Nations member states as far as possible in the
name of international comparison and coordi-
nation (Rice et al., 1946, pp. 223). In order to
join the international society, the adoption of stan-
dardized accounting was necessary; it was regarded
as part of the democratic process. Originating in
the early 1940s in Britain, national accounting had
already become a prerequisite for membership of
282 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
the international arena, and it was about to take a
central role in Japan, which evaded the objections
of Marxists and socialists who could have pre-
sented dierent pictures of the Japanese economy
to serve distinct functions.
Sapir further drafted a practical report entitled
Japanese National Income Statistics Program
and Appraisal (Sapir, July 1947). As a result of this
report, a series of statistical reforms came to be exe-
cuted within the following 10 years. These reforms
included new statistics curricula at schools, on-the-
job training (known as the OJT in Japan), the
formation of government data policy, and the
report control exercise. Many of such reforms
were developed by the members of Hitotsubashi
School of Economic Statistics, who became the
major economic policymakers in the Government
from the 1950s to the 1970s (e.g., Iochi, 1970,
1971, 1972; Kurabayashi, 1966, 1974). These fun-
damental reforms provided the infrastructure for
Japans statistical system, which turned out to be
the foundation of a famous series of economic
planning, most notably the Income Doubling
Project (19611970). Asano, former Chief of the
Economic Planning Agency (the successor of the
ESB) in the age of Japanese growth, conrms that
the most frequently used and fundamental data for
planning purposes were those of national account-
ing (Asano, 19611962). In an interview with the
author, Kurabayashi one of the authorities of
the Hitotsubashi School and the former Chief of
Statistics Section of the United Nations also con-
rmed the premise that national accounting
became the main framework for the economic data
system used in this series of economic planning and
reform. (Kurabayashi, 1971; Interview with Kura-
bayashi, August 1998, 2003).
In order to operationalize such national-
accounting-centred macroeconomic management,
however, economic statisticians required further
reforms of corporate accounting to create a micro
foundation for the above infrastructure, which we
will review in the following sections. Before we pro-
ceed, however, let us summarize this section from a
viewpoint of in what way the democratic econ-
omy started being developed. It is clear that the
new epistemological and management framework
began development under the strong inuence of
the international movement of standardizing eco-
nomic data within an accounting framework. Fol-
lowing the USSBS, the Rice Statistical Mission
also tried to implement the Keynesian accounting
framework in Japan. However, there had tradition-
ally been a dominant school of thought in Japanese
academia Marxism. Despite their eorts, Marx-
ists did not manage to develop their socio-eco-
nomic statistical framework. Here, some readers
may imagine that the US asserted its ultimate
authority to determine the future socio-economic
framework. However, there is no evidence to sup-
port this. There is a substantial amount of evi-
dence, instead, to suggest that Stewart S. Rice
was widely known and highly respected among
Japanese academics as a thoughtful gentleman
who never imposed any prexed US policy upon
the Japanese (e.g., Morita, 1980). At an early stage
of the US Occupation, there was only slight pres-
sure upon the Japanese to adopt any US-preferred
political and economic regime, as long as the new
regime was in line with the basic Occupation policy
of democracy as opposed to Imperialism (Point
B-1; see also the third Section of Part II, Reform
of accounting SMEs and accounting education).
Instead of US authority, what seemed to be
powerful and consistent was a belief in the inter-
national standardization of accounting and the
rhetoric associated with it (Point B-2-i). Leaving
Japanese philosophy of economic thoughts aside,
the Keynesian accounting regime was supported
on the ground of such rhetoric as international,
standards, accuracy, coherence and com-
parability. These terms also echoed with the basic
US Occupation policy of democracy, as stan-
dardized national accounting was seen as a prere-
quisite for Japan to join such a democratic
international community. Following this line of
development, there was a series of legal and insti-
tutional reforms that centralized the governments
statistical function. There was even a projection of
the rst Economic White Paper (1951) which exe-
cuted the governments public accountability.
The newly emerging economic regime was, in this
sense, a government for the people, certainly in
line with the notion of democracy in a basic
sense (Point B-1). However, this democratic
regime and statistical habits of thoughts were
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
not developed through a democratic process, since
the rhetoric of internationally standardized
accounting drew the attention of Japanese econo-
mists away from the substantial arguments that
existed for their preferred economic regime.
Corporate accounting for macroeconomic
management
Turning to the USSBS and Statistical Missions
contribution to corporate accounting, identica-
tion of the uselessness of existing corporate
accounting was of utmost importance. The Mis-
sions, and in particular Sapirs, concern with cor-
porate accounting arose as a result of the Zaibatsu
dissolution which, as already explained in the
above section, National accounting as a demo-
cratic framework of economic society, was origi-
nally a matter of democracy and socio-economic
management. Sapir considered that the analyses
of the Zaibatsu-centred national economy and
their income estimates could not be improved
beyond the quality of the primary corporate data
on which they were based (Sapir, July 1947, p.
7). As cited at the beginning of Introduction, it
was in this context that Sapir deplored the de-
ciencies of Japanese corporate and tax account-
ing. He found Japanese accounting of virtually
no use for macroeconomic data construction
and analysis (Sapir, July 1947, p. 14).
This does not necessarily mean, however, that
original Japanese accounting was wrong or de-
cient in its own domestic environment and context.
The Mission found that there was no tradition of
accountability of Japanese corporations to the
stockholders or the government (Sapir, July 1947,
p. 14), which was stated perhaps with a little exag-
geration. However, it is still clear that unlike enter-
prises in the UK and US, Zaibatsu and large family
companies were largely a well-kept secret. The
well-kept secrecy, here, does not mean that they
were simply unknown. Rather, management of Zai-
batsu and large family companies included an ele-
ment of secrecy as an important factor of their
success. As Japanese management literature often
illustrates, Japanese management tends to be impli-
cit rather than explicit, informal rather than formal,
and blood- or kin-based rather than talent-based
283
(e.g., Morris-Suzuki, 1989). In terms of their rela-
tionship with the government, Zaibatsu companies
operated on the grounds of co-operation rather
than report, check and control. As economic his-
tory research often suggests, Zaibatsu companies
are generally considered to have played an impor-
tant role in Japans early industrial moderniza-
tion.23 Therefore, the deciencies of Japanese
accounting should be understood to mean that
existing accounting, or lack of it, was not suited to
providing the macroeconomic data that the Mis-
sion required to manage the economy in their pre-
ferred manner.
The Finance and Cartels Branch, from the
Research and Statistics Division of the ESS, was
created as a result of these concerns, and its rst
task was to analyse the nancial structure of Zaiba-
tsu companies. In October 1945, the release of a
memorandum, Reports to be Made by Certain Busi-
ness Firms, directed all major Zaibatsu rms to pro-
vide their nancial statements of the past 10 years,
as well as future projections (SCAP, 1945).
The ESS faced two problems, however. Firstly,
William G. Hessler, Chief of the Research and Statis-
tics Division and formerly a Certied Public Accoun-
tant of Illinois, did not read Japanese.24 Although
Reports were to be made in English for GHQ, the lan-
guage dierence remained a major barrier to under-
standing Zaibatsu companies. In the absence of
standard Japanese accounting practices and termi-
nology, the translation of the companies nancial
statements made little sense to the ESS ocers. To
resolve this problem, Iwao Iwata, an accountant
23
Even in the process of the Zaibatsu dissolution, leading
economists and government ocials defended the positive value
of Zaibatsu in the following way: The Zaibatsu (allied with
feudalistic state power) was a weapon with which Japan, as a
junior capitalistic country, was armed in entering the interna-
tional arena. In order to hold her own in the competition with the
large capital of the Powers, she had to concentrate her capital to a
high degree, and on the other hand, on account of the narrowness
of the investment market at home, the large capital had to seek
the objects of its investment in every branch of economy. These
basic conditions will remain unchanged in future, . . . (Special
Research Committee, 19451946, p. 87 & 91).
24
William G. Hessler was at the Economic and Scientic
Section, Programme and Statistics Division (Murase stated that
Hessler was a CPA in Illinois, whereas Kurosawa stated
Wisconsin).
284 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
from the Business Accounting Association, was
placed in charge of classifying and subsequently stan-
dardizing accounting terms. In late 1945, he started
preparing a list of Japanese terms accompanied by
their equivalent US terms, which was eventually pub-
lished as a handbook in March 1947.
A further diculty was that there was little legal
precedent relating to accounting practices before
the War. There was a statement of Working Rules
for the Accounts prepared by the Ministry of Com-
merce and Industry (1934), which set forth terms
and format of nancial statements. It was merely
a guideline with no binding legal force, and thus,
as Gen Murase (see below for his detail) illus-
trated, was not eective.
The most regrettable national trait is that the
Japanese do not undertake any action unless
they are forced by law. Company practices,
except for some banks and others that were
regulated by special laws, did not follow
the Working Rules at all. . . . Some performed
window-dressing; some nancial statements
were oversimplied; classications of
accounts were at random and divergent
between companies; and the English transla-
tion was hardly intelligible. As a result, sub-
mitted nancial statements and other
documents to GHQ were totally unreliable
(Murase, 1958; Suzukis translation).
The Mission therefore began developing a r-
mer microfoundation of the data system, enabling
the Occupation force to collect data on Japanese
companies and the economy in a more familiar
and autonomous framework. This view came to
be shared not only by the US ocers but also by
the Japanese economic statisticians such as Tsuru
and Takahashi, who eventually turned to a couple
of key academic accountants, Michisuke Ueno and
Kiyoshi Kurosawa.25 Kurosawa compiled a scrap-
book, a collection of various articles, newspaper
cuttings, and notes on the Zaibatsu dissolution,
which reveals his view that the Zaibatsu dissolu-
25
Michisuke Ueno Professor Emeritus at Tokyo University
was Kurosawas teacher. He was a highly esteemed and senior
authority in academic accounting at that time, having a similar
status as Ohuchi and Takano in statistics academia.
tion should be the foundation for the re-construc-
tion of peaceful and democratic national economy
through the decentralization of economic power
and reorganization of it in a rational way (Kuros-
awa, 19451948). Therefore, the collaboration
between economists and the Occupation force
was ideal for Kurosawa to pursue his own plan
to make accounting the foundation of the coming
economic society.
Kurosawa recollected that even in the academic
eld, there was no one, other than Mr. Iwata and
myself, who was interested in the generally
accepted accounting principle in Japan (Kuros-
awa, 1979d No. 4, p. 554). There were two
accounting regulations that were enacted during
the War to rationalize the production of muni-
tions. Tentative Standards for Financial Statements
of Manufacturing Companies, 1941, and Manuals
for Costing in Manufacturing Companies, 1942, set
by the Planning Board, coined the rst attempts
in Japan to legally regulate enterprise accounting.
However, since actual accounting was rarely prac-
tised in accordance with these wartime regulations,
they turned out to be of little help to GHQ. The
constraints of war aorded no time to enterprises
for the study of such regulations and the prepara-
tion of detailed nancial statements. Because stan-
dardized accounting practice could not be achieved
nor maintained without continuous education and
training, the improvement of standard cost
accounting, nancial statements, and auditing were
discussed in the No. 84 Sub-committee for Man-
agement and Accounting, at the Japan Academic
Promotion Society from March 1946 (Dai, 1946).
However, these eorts reaped only limited benets
to the GHQ. Collected nancial data revealed
rather incomprehensible and contradictory results
within nancial statements, further aggravating
GHQs frustration and distrust towards Japanese
accounting practices.
GHQ required more help from a Japanese citi-
zen who had a satisfactory command of English.
Gen Murase worked for Yasuda group one of
the Zaibatsu conglomerates and was therefore
obliged to prepare an English version of Yasudas
nancial statements for GHQ. In contrast to the
eorts of his peers, Murases translation proved
to be relatively comprehensible to the Allied Pow-
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
ers. In order to assist Hessler at the Programme
and Statistics Division of ESS, General Marquette
commissioned Murase to translate various Japa-
nese nancial statements and the aforementioned
two wartime regulations into English (Murase,
1958; Kurosawa, 1969). In July 1947, Hessler
and Murase drafted Instructions for the Prepara-
tion of Financial Statements of Manufacturing and
Trading Companies for the Zaibatsu companies
to use as temporary accounting standards (Eco-
nomic & Scientic Section, 1947; ESS/RS, n.d.,
1947; anon, 1947; see Fig. 4). It was in part based
on wartime regulations but more on the US-ori-
ented principles explained in works such as A
Statement of Accounting Principles by Sanders,
Hateld and Moore (1938), as well as Accounting
Principles by the American Accounting Associa-
tion (1936). The Instruction states that its purpose
is to lay the foundation for improving and stan-
dardizing Japanese commercial and industrial
accounting practices. Statements furnished to
the SCAP (Supreme Commander of Allied Pow-
ers) in the past have disclosed deplorable short-
comings in accounting practices and procedures
(anon, probably Hessler and Murase, 1947) (see
Fig. 3 for the rst standardized form of nancial
statements in Japan).
These eorts fell along the same lines as those of
statisticians. It was in fact Takahashi, as a member
of the Statistical Committee and liaison ocer of
GHQ, who visited Michisuke Ueno in late Decem-
ber 1947 to convince him to realize the idea of the
Accounting Committee and the Accounting Law,
modelled on what had been established earlier by
the statisticians (Kurosawa, 1979a and c, No. 1,
p. 100, No. 3, p. 98). Prior to this, Ueno and
Kurosawa had developed the same vision of estab-
lishing a central organization immediately under
the Prime Ministers Oce, based on the indepen-
dent Accounting Law that would control all
accounting issues of related branches such as secu-
rities and tax. However, the rst time round, the
idea to establish the Accounting Committee and
the Accounting Law miscarried (Kurosawa,
1980d, No. 4, p. 91). Ueno and Kurosawa faced
severe objections from the Cabinet Oce, the Min-
istry of Finance, the Tax Administration Agency
and the Ministry of Education, because the reform
285
meant a radical change in power relationships
amongst ministries and a loss of their vested right
to control accounting regulations. Statisticians
had faced the same problem in obtaining the co-
operation of the Ministry of Finance, and it was
only after Sapirs report which insisted upon
mutual co-operation, did statistical reform pro-
ceed smoothly (Sapir, July 1947, p. 4). Similarly,
the eorts of Ueno and Kurosawa were made eas-
ier when given the support of the Allied Powers
and the Statistical Committee who were keen on
overseeing both the dissolution of the Zaibatsu
companies and the general improvement of macro-
economic statistics (Point B-2-ii).
Enlightened by statisticians in this way, Ueno
and Kurosawa found another opportunity to pur-
sue their original project. Kurosawa organized a
working group to establish the Accounting Com-
mittee and the Accounting Law. The proceedings
of the rst meeting of the Committee listed names
such as Ueno and M. Hashimoto (on behalf of
Takahashi) at the top of the list in order to high-
light the legitimacy of their act: For the sake of
economic statistics (anon, 24/03/1948). Five eco-
nomic statisticians Takahashi, Masaki, Minobe,
Hashimoto and Ohta were also listed together
with thirty-two other members from accounting-
related bodies such as the Tax Administration
Agency, the Ministry of Finance, and the SEC.26
26
The nalized List of Members (i.e., not Draft List of
Members) does not include the names of Takahashi and
Masaki. However, the draft version shows a precise context of
macroeconomic management in which Japanese accounting was
reformed. Kurosawa also revealed that Takahashi often
attended preparatory meetings for the establishment of the
Committee (Kurosawa 1979d, No. 4, p. 98). The presence of the
Ministry of Finance, which later became the most powerful
institution to control accounting matters in Japan, was
remarkably low. In replying to Swansons (see next footnote)
request to comment on the proposed forms of nancial
statements, the Ministry of Finance only attered those who
developed the new nancial statements. . . . we see on these
forms extremely advanced parts and we come across many
points that are deemed much more practical than the statements
now being adopted by various companies in Japan. Accord-
ingly, we are intending to adopt the forms perpared [sic.] by
concerned division of G.H.Q. as one of the basic data for such
study to be made within Ministry of Finance . . . (Sakai, T.
Ministry of Finance, 8 December 1947, pp. 23).
 286
T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Fig. 3. First Standardized P/L and BS. The Modern Origin of Standardization. An internal memorandum by Frank A. March and William G. Hessler explains in detail the contexts in which
forms and instructions were developed. These forms were prepared . . . to serve generally the purposes of all sections and divisions requiring nancial data on companies from time to time. . . A
great deal of work, time and thought was given to the design of these forms, and leading Japanese accountants were consulted repeatedly to the end that the forms might take into account fully
the many strange Japanese legal and accounting concepts and yet conform to accepted American principles. . . it is hoped that the requirement of furnishing these statements will be the
motivating force in achieving a revolutionary transition in Japanese industrial accounting from antiquated and fallacious accounting concepts to a point closely approaching modern American
accounting and nancial reporting procedures (March & Hessler, 1947). These forms were distributed to thousands of companies, lled, collected and then aggregated to industry and
macroeconomic levels. Source: NARA, RG 331, Box No. 8204, Securities Exchange to Jap Statistics.
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301 287

Fig. 4. Early draft of instruction by W. Hessler about how the forms should be completed. Towards the rst regulated and standardized
accounting practices. The ESS demanded large companies follow instructions so that the completed data made sense for the ESS
ocers. Source: NARA, RG 331, Box No. 8107. Money to Industrial Occupation.
288 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Accountants re-approached the Ministry of
Finance and the Prime Ministers Oce to set up
the Accounting Committee.
However, once again, they failed to obtain the
much-needed co-operation (Kurosawa, 1979d,
No. 4, p. 101). Yet, this time, Ueno and Kurosawa
did not give up and turned to the Statistical Com-
mittee and the ESS. Initially, even Frank A.
March a CPA from California and Hessler of
ESS, were reluctant to establish an omnipotent
accounting committee.27 Insofar as enterprise
accounting was regulated within the American-
style regulatory framework, there was no need to
upset the already-established ministerial relation-
ship (Kurosawa, 1979d, p. 98). There was, after
all, no example of such powerful institutions as
the Accounting Committee or the Accounting
Law, not even in Anglo-American or other
advanced economies.
In Kurosawas opinion, however, the US had a
very powerful accounting institution in place, and
Japan needed a similar centralized accounting
institution:
Even in the United States, the accounting
system reform was not achieved in the hands
of the private sector alone. It is true that the
American Institute of Accountants, the
Trade Association and other private bodies
contributed signicantly to the standard set-
ting; however, without the co-operation of
the Federal Reserve Board, the Internal Rev-
enue and the Securities and Exchange Com-
mission, there would not have been todays
27
Robert Swanson, as a senior of March and Hessler, seemed
to be more supportive of the idea to establish the Accounting
Committee (Swanson, 15 August, 1950a). Rather than being
scholarly and objective, he seemed to be politically enthusiastic
to realize standardized accounting as a foundation of the new
Japanese economy: one of the unfortunate habits which the
Committee developed in the past was the tendency toward long
academic arguments on obtuse points. I became very unpopular
by debunking academic hogwash in favour of results
(Swanson, 15 August, 1950a). It can reasonably inferred from
his memorandum that he played an overall supervisory role in
the reform, incorporating the statistical reform into detailed
corporate accounting regulations including those of auditing
(e.g., Swanson, 15 August, 1950a, 1950b; 22 September 1950).
Yet, details of his prole are still unknown.
successful systems. . . . In contrast, in Japan,
there is no private body akin to the Ameri-
can Institute of Accountants. It is not feasi-
ble, at present, to quickly organize a
private body for the improvement of
accounting systems. As we observed in the
statistical reform, accounting reform cannot
be achieved by private bodies alone. . . . In
order to propose an accounting reform
which will have an inuence on the Tax
codes, the Commercial Codes and other reg-
ulations, we must have an Accounting Com-
mittee with the highest authority over the
relevant ministries. (Kurosawa, 1979e, No.
5, p. 101, p. 99 Suzukis translation.)
Kurosawa asked for help from Iwata who was at
the time one of a few Japanese accountants famil-
iar with American accounting standards. They
persuaded Hessler to send a memorandum to his
senior ocer, March, to recommend the establish-
ment of the Accounting Committee (Kurosawa,
1979d, p. 101). Hessler accepted their request and
issued a memorandum on 3rd March 1948 (Hess-
ler, 03 March, 1948). The memorandum explained
the conditions and methods of the Japanese
accounting system that were far behind those of
the West and noted that these had been a serious
obstacle in developing signicant economic statis-
tics in Japan. The next day, a similar memoran-
dum was sent to General Marquat in the joint
names of Emerson Ross (Chief of Research
and Statistics Division of ESS), March, and Hess-
ler (ER/WGH/FAM/tm, 04 Mar., 1948; see
Fig. 5).
Ueno and Kurosawa also exploited the power
of another GHQ ocer, as well as the Prime Min-
ister. As we see in the memorandum, the project
included some civil information and educational
perspectives. This was to draw the attention of
an education enthusiast, L.Q. Moss, Chief of
Vocational Education Unit, Civil Information
and Education Section, GHQ. With much help
from him, Ueno and Kurosawa organized a Con-
ference on Accounting Standards and Education
in May 1948 (Conference on Accounting Stan-
dards & Education, 1948; Kurosawa, 1979, Vol.
31, No. 4, p. 101, No. 12, p. 99). The invitation let-
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Fig. 5. Memo for general marquat. E. Ross, W.G. Hessler and F.A. March sent a memorandum to General Marquat on 4 March 1948 to clarify the necessity to revise
the texts, curricula and educational methods in the teaching of accounting and related subjects in the commercial schools and colleges, and to develop eective laws
governing the practice of accounting as a profession, and to encourage the growth of professional accounting societies to foster and promote professional ethics and the
adoption in Japan of the principles of modern universally accepted accounting practices. (ER/WGH/FAM/tm, 04 Mar., 1948, p. 1). They emphasized that accounting
reform was a matter of democracy and economic development: The dissemination of the knowledge of modern methods of accounting, now in progress, is essential to
the establishment of democratic principles and should prove of the greatest value in following developments in Japanese enterprise both during and after the
Occupation (ER/WGH/FAM/tm, 04 Mar., 1948, p. 2). Followed by the approval of the General, a memorandum was sent by Moss to the Various Sections on 9
April 1948 to call for support for the conference to improve Japanese accounting methods and education (Moss, 1948).

289
290 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301

ter was sent to a wide range of individuals and should be speedily established, gathering per-
institutions such as the Association of Industrial sons of knowledge and experience to improve
Accounting, the Ministry of Finance, the Ministry the accounting of enterprises. At the same
of Education, the Ministry of Commerce and time the Committee should be required to
Industry, the GHQ, economic associations, aca- make basic investigations into a fundamental
demic accountants and statisticians, and the press reform of accounting education, which is a
(Ueno, 07 May, 1948). Chaired by Ueno, the con- precondition for improvement. It is essen-
ference was successfully held on 14th May 1948 in tial that this organization be able to put
Tokyo. The underlying and most important prac- results into immediate practice (Ueno, 14/05/
tical purpose of this conference was to submit 1948).
the Conference Resolution to Prime Minister Ash-
There are three points to note in this Resolu-
ida. Ueno and Kurosawa intended to use this
tion. One is the reasoning for the reforms of
opportunity as a solid foothold for the establish-
accounting and accounting education (Point A-
ment of the Accounting Committee. The Resolu-
2). In so much as Japanese accounting at that
tion that was addressed to the Prime Minister
time was concerned, the pressure for reform did
read:
not come immediately from currently taken-for-
granted users such as shareholders and investors.
To: Mr. H. Ashida, Prime Minister. May 14,
On the surface of letters of laws, regulations,
1948.
and textbooks, the need for accounting principles
Resolution
for stewardship or for micro-corporate account-
The improvement of business accounting is
ability was often emphasized, but this may have
one of the most essential conditions for the
resulted from a dierent reason and context:
democratic reconstruction of the Japanese
utilizing the US regulations to gain their help.
economy. It is a well-known fact that our
Voices of management, shareholders and inves-
countrys accounting practice is very back-
tors rarely appear in the Kurosawa and NARA
ward compared with Europe and America.
archives. On the contrary, sudden interests from
As a consequence, it is dicult to know with
the Japanese business community in accounting
accuracy the nancial condition of enter-
standards, which consequently appeared only
prises and the results of their operations.
toward the end of the accounting reforms,
This prevents the formulation of eective
appeared to undermine the development of the
business statistics. Unless a scientic founda-
new standards.
tion is established for the modernization of
business accounting it will be dicult even On 13 July 1950 and again on 10 August
to initiate the rehabilitation of industries in 1950 the Keizai Dantai Rengokai (Economic
spite of the introduction of foreign capital. Bodies Federation later the famous Kei-
Further, it will be impossible to make any dan-ren: Suzuki) sent letters to the chief of
progress toward the solution of various the ESS and to the Chief of the Accounting
problems closely connected with modern Standard Council. Although on the face of
accounting, such as the stabilization of the it, this sudden interest in accounting stan-
price structure, the rationalization of nan- dards is an encouraging sign, I fear that the
cial accommodation to enterprises, the Federation has as an ulterior motive the dis-
democratization of investments in securities, crediting of the work of the Accounting
the protection of investing masses, fair taxa- Council. If they can show just cause for
tion on enterprises, the production of eco- ignoring the standards they can justify
nomic data in labor and other industrial retaining the present accounting methods or
disputes, etc. lack of them, making meaningful audits a
Accordingly, an Accounting Standards and near-impossible job (Swanson, 24 August
Education Commission (tentatively named) 1950).
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
It is not precisely clear from historical evidence
why the Federation was against, or at least not
keen, on the Accounting Councils reform, but it
appeared that business communities feared the po-
tential loss of control over their individual
accounting. This should not be taken to mean that
there was no need for modern accounting among
managers, shareholders and investors. They did
not, however, prioritise the standardization of
accounting and they did not appeal to the author-
ities to set up a central administrative organization
in the Cabinet. For the reformers, too, each indi-
vidual business was not the principal object of
interest. Much reference was made, instead, to so-
cio-macroeconomic conditions such as the the
democratic reconstruction of the Japanese econ-
omy, rehabilitation of industries, the stabiliza-
tion of the price structure, introduction of
foreign capital, and the production of economic
data in labour and other industrial disputes (Point
A-2, B-1). In this context, the dissemination of the
knowledge of modern methods of accounting was
characterized as essential to the establishment of
democratic principles and should prove of the
greatest value in following developments in
Japanese enterprise both during and after the
Occupation (ER/WGH/FAM/tm, 04 Mar. 1948,
p. 2 italics added). As we have already seen in
the statistical reform, the rhetoric of democracy
again helped to push accounting reform forward
(Point B-2-i).
Secondly (Point B-2-ii), the Resolution did not
refer to the planned Accounting Law, nor did it
mention the way in which accounting standards
should be regulated. More emphasis was placed
on the role of professional education. The commit-
tees ultimate aim was no doubt to formalize
accounting standards as an Accounting Law.
However, Ueno and Kurosawa carefully withdrew
them from the text of the Resolution to avoid the
anticipated hierarchic conicts between the Com-
mittee, the Tax Administration Agency, and the
Ministry of Commerce and Industry, each of
which sought dierent accounting standards in
their own interests. Since this conict could have
brought an end to the entire project, Kurosawa
had to conceal, at that time, Accounting Law from
the Resolution (anon., 3 PM., 24 March, 1948).
291
Thirdly, closely related to the second point
(Point B-2-ii), the Resolution used the tentative
name of Accounting Standards and Education
Commission instead of the Accounting Com-
mittee. According to Kurosawa, this was because
he could not obtain prior consent from the Prime
Minister for the committee to be placed directly
under the Prime Ministers jurisdiction. Ueno
and Kurosawa came to know that the committee
would be placed for now under the Economic Sta-
bilization Board (ESB), which was the highest
authority in the Cabinet, but not directly under
the Prime Ministers jurisdiction. They settled on
a temporary name, whilst waiting for another
chance to promote the Commission as the
Accounting Committee (Kurosawa, 1979b,
No. 2, p. 99, No. 4, p. 101).
On the same day, Prime Minister Ashida
accepted the Resolution. With the full support of
Moss and R. C. Franck, Corporation Branch,
Research and Programme Division of ESS, the
Cabinet nally approved the Committee for Busi-
ness Accounting Improvement on 29th of June
1948, which was placed directly under the ESB
(Naikaku, 1948). The committee was formally
named as Kigyo Kaikei Seido Taisaku Chosa-
kai (Investigation Committee on Business
Accounting Systems, or Research Committee on
Enterprise Accounting System. Hereafter, Investi-
gation Committee),28 and its rst plenary session
was held on 16th July 1948 (Ueno, 30 September,
1948).
Eorts to further the creation of an Accounting
Committee and Accounting Law continued. In
November 1948 (at the very latest, according to
the Kurosawa Archives), as he had planned,
Kurosawa drafted the Accounting Law in which
Article 5 proposed to establish the Accounting
Committee under the Prime Ministers direct juris-
diction.29 However, Ueno and Kurosawa soon
28
In the archives, dierent English names are used for this
committee: e.g., the Council, Investigation Committee on
Business Accounting Improvement, the Research Committee
on Enterprise Accounting System, etc.
29
In some English versions, the Accounting Law is translated
as the Business Accounting Standards Law and the Cor-
porate Accounting Law.
292 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
faced the strongest objections ever experienced
from government organs, such as the Securities
and Exchange Commissions and the Ministry of
Finance. In early February 1949, Ueno explained
to the ESS that they still wanted an Accounting
Law: Dr. Ueno . . . explained that the council
(i.e., Accounting Committee) as provided for by
the law would be an advisory committee with no
power to force any agency to accept their sugges-
tion (Swanson, 11 February 1949, p. 1). However,
within the same month, Ueno and Kurosawa had
to bend their position signicantly in reply to the
ministries: . . . surely, we do not intend to provide
for the very accounting standards and the audit
standards in laws (Ueno, Feb. 1949, p. 4; see also
Ueno, 5 November, 1949). The power of the
planned Accounting Law and Accounting Com-
mittee was quickly diminishing.
After all, Ueno and Kurosawa did not succeed
in establishing an Accounting Committee and
Accounting Law as they wished. They, instead,
only managed to publish Business Accounting Prin-
ciples, (i.e., the Japanese GAAP). The Principles
were originally published as the Committees
An Interim Report, with the nal version
expected to be realized as Accounting Law. Sixty
years after its publication, however, it still remains
the Investigation Committees Interim Report.30
As such, in relative terms compared to statisti-
cians, who managed to establish the Statistics
Committee and the Statistics Law, accountants
appeared to be less successful.
This failure should not imply a lack of eorts of
accountants in comparison to those of economic
statisticians, however. The accountants misfortune
should be understood alongside the large climate
change in Japanese governmental organizations as
a whole. By the beginning of 1949, the Government
faced the acute need for re-organization of its agen-
30
I am indebted to Professor Junichi Chiba for this point. The
other explanation for this interim-ness can be found in
Kurosawa (1980d, No. 4, p. 94). He stated that the report is an
interim one because it should be continuously criticized until it
has established itself as a set of generally accepted accounting
principles via the process of consensus. The two accounts do
not necessarily contradict each other, but Chibas insight seems
to be more precise.
cies, many of which were fragmented, complicated
and expensive to maintain. A reduction of 30% in
the number of bureaus, divisions and other unites,
and reduction in the number of personnel in each
ministry by approximately 30% were planned
(anon. 16 April 1949), which threatened even the
existence of the Statistics Committee. Although
GHQ was concerned and even suspected this reor-
ganization as a possible sabotage of statistical
reporting to SCAP by the Japanese government
(Brenner, 15 March, 1949, p. 1), they were already
in a new phase of Occupation policy: to give back
the control [to the Japanese Government], and
GHQ, SCAP will refrain from dictating that the
Japanese Government should do this or should
not do that. Along with this line, ESS/PS will not
hereafter intervene in the Japanese Governments
project for Statistical survey of corporations
(Saito, Sept. 27, 1949, p. 1). Under these conditions,
accountants seemed to have lost the opportunity to
utilize absolute US authority to make central
accounting regulation and organization the micro-
foundation of economic management (Point B-2-
ii). At this point, the common dream of statisticians
and accountants to manage the national economy
based on standardized accounting seemed to have
lost its core.
Concluding remarks for part I
In Part I, we have examined the history of Jap-
anese economic statistics reform from a viewpoint
of international standardization of accounting in
the 1940s (Point A-1). Initiated by the UK and
US, and supported by the League of Nations,
there was a clear international trend that tried to
standardize economic statistics for the sake of
the growing international society in which the col-
laboration of member states was expected at inter-
national organizations such as the World Bank,
the International Monetary Fund, the I.L.O.,
UNESCO, W.H.O., and I.C.A.O.
Upon Japans acceptance of the Potsdam Dec-
laration, the US tried to reconstruct the devastated
Japanese war economy, and to transform the Zai-
batsu-centred economy to a more democratic
one on the basis of newly developed economic sta-
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
tistics. The public started being re-educated with a
view to understanding their economy and society
with the habit of statistical thinking rather than
under the order of the Emperor. In the sense that
the newly projected economy was equally for the
public as it was for a more open international soci-
ety, the new regime can be characterized as dem-
ocratic in the most basic sense of the term (Point
B-1).
However, that which was implemented in the
name of a democratic economy was also the
Keynesian macroeconomic management frame-
work. The instant origin of the newly standardized
economic statistics was in the UK where Stone,
under the supervision of Keynes, developed empir-
ical data and evidence to support Keynes eco-
nomic interventionism. Seemingly politically
neutral statistics entailed a hidden policy implica-
tion to support Keynesian macroeconomic man-
agement. This framework became operationalized
in practice by Keynes political involvement at
the British Treasury and Stones leadership as
Chief of the League of Nations Statistical Oce
and leader of the Tripartite Discussion between
Britain, Canada and the US in 1944.
How, then, did such a Keynesian economic sys-
tem grow its roots in traditionally Marxist Japa-
nese academia? There seemed to be two main
factors. One concerns the rhetoric of languages
that recurred in the process of implementation
(Point B-2-i). The key actors, both in the statistical
and accounting reforms, constantly associated the
implementation of a new statistical framework to
such phraseology as accuracy, coherence,
comparability, international, and stan-
dards, which are all characterized as prerequisites
for the development of a democratic economic
force following the War. Veiled behind this
quasi-denitional correctness of language, more
substantial discussions and political debates
between Keynesians and Marxists were lost in
practice. The Keynesian economic thoughts and
practices quietly penetrated Japan on the basis of
seemingly neutral and democratic accounting. It
was an almost-unnoticed but steady revolution
that determined the course of Japans economic
management, much in the same way as occurred
the UK and the US (Galbraith, 1980).
293
Secondly, a small number of key actors utilized
political and institutional authorities and struc-
tures (Point B-2-ii). It is not surprising to observe
that US ocers utilized their authority as the
Occupation force. What is interesting is that key
Japanese statisticians and accountants also bor-
rowed the exogenous power in attempting to over-
come domestic political conicts and objections.
In order to establish the Statistics Law and Statis-
tics Committee, Hitotsubashi economists utilized
the power of the Rice Statistical Mission. Similarly
Ueno and Kurosawa borrowed the authority of
the GHQ ocers in trying to establish the central
Accounting Law and the Accounting Committee,
which eventually failed. However, both the statisti-
cians and accountants intentions were clear: they
tried to establish a centrally controlled economic,
nancial data, and management system, which
stood on the rm bases of a central law and a sin-
gle overseeing government institution.
In order to achieve such radical political and
legal re-organization, reformers acted under the
shelter of the superpower. In this process, there
was only little sense of due process and wider con-
sultations. Rather, a priority was given to swift
and radical reforms towards centralized economic
and nancial data and management systems. In
this sense, there seems to have been much more
fundamental belief in something which went
beyond the dierence between Marxist and Keyne-
sian regimes (Point B-3). Indeed, such belief, which
we will examine in Part II in detail, was the driving
force of a series of reforms including the introduc-
tion of the Japanese GAAP, Certied Public
Accountants, Audit Standards, Essentials of Sim-
plied Retail Store Bookkeeping, Essentials of
Bookkeeping for Small and Medium-sized Com-
panies, standard textbooks of accounting, costing
and auditing, school curricula, and free public lec-
tures to practically disseminate the new practices
according to the regulations.
Finally, it may be useful for future research to
illuminate some implications of the above history
in considering the rapid emergence of IAS/IFRS
which has been regarded as a Brave New World,
due to the lack of experience in standardization
practice and research (Ball, 2005), which seemed
to have passed without much critical examination
294 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
(Brown, 2004). One may wonder to what extent the
history of national income accounting can oer
something useful to compare. However, in 1981,
the Institute of Chartered Accountants in England
and Wales (i.e., ICAEW) already found some sim-
ilarities in Stones eorts in internationally stan-
dardizing national income accounting and the
accountants dream of internationalizing corporate
accounting. In the hope that there were some les-
sons to be learnt, ICAEW requested Stone to
record his experience (Stone, 1981b; 25th June,
1979; Stone, 1981a). At that time, international
standardization of corporate accounting was far
behind, and Stone recognized more dierences
than similarities, yet he still explained some use in
knowing the history of the international harmoni-
zation of national income accounting (Stone,
1981b). After a quarter century, international stan-
dardization of corporate accounting at a global
level is a plausible scenario, and there seems to be
at least a few clear points to compare. These points
have already been identied in the above history:
(A-1) the process in which a nations accounting
came to be subjected to the movement of interna-
tional standardization; (B-1) the unexplored
impacts of international standardization on the
courses of one nations economy and society; and
(B-2) the uses of rhetoric, institutions and legal
arrangement that enables relatively small number
of actors to achieve international standardization.
Detailed comparison of each point goes beyond
the scope of this paper, but some indication of com-
parative research would be useful for future investi-
gation of current international accounting issues
and even on the democratic legitimacy of global
regulation setting (Held, 2004). First, let us con-
sider the case of modern day Japan. Towards the
end of the 20th century, after severe criticisms from
overseas directed at Japanese accounting practices,
Japan had to come through the so-called Account-
ing Big Bang (Kikuya, 2001; Accountancy, 1997;
Mizuno, 2004).31 The issue was certainly a result
31
Symbolically, in October 2004, as soon as Sir David
Tweedie, the Chairman of the International Accounting Stan-
dards Board (IASB), visited Japan, the Accounting Standards
Board Japan (ASBJ) strengthened its new programme to
harmonize the two regulations (IASB, 2004).
of the less-than-transparent state of Japanese
accounting in the 1990s from overseas perspectives.
The subsequent reforms were led mainly by a rela-
tively small number of key personnel from the
major international organizations and Japanese
academics and ocials. In this process, the domi-
nant rhetoric was again international standardiza-
tion, transparency, and comparability. How,
historically, did the US use international organiza-
tions and the rhetoric of international standardi-
zation, transparency and comparability in
order to implement their preferred accounting and
economic regimes? They used international organi-
zations to disseminate democratic and Keyne-
sian economic policy in developing international
society. This time, in the development and imple-
mentation of IAS/IFRS in Japan, what is it that
IASB, IOSCO and other powerful international
bodies are trying to disseminate? If the answer is
to develop more ecient capital markets for
the sake of shareholders and investors, is this justi-
able without considering the wider impacts on
local economies and societies?32 The forgoing his-
tory suggests that accounting can do much more
than simply promote transparency and compara-
bility of companies for the sake of shareholders
and investors. The use of international standard
rhetoric can veil fundamental agenda that are more
important than the mere development of ecient
nancial markets, for example, the development
and maintenance of a fundamental economic
regime.
Such a concern may better be illustrated with
the case of China, for example, where the mainte-
nance of Marxist thoughts is once again the main
agendum of the political leaders (CASS, 2006). In
introducing a market-based economy, the govern-
ment has already reformed the countrys account-
ing system to a large extent, and the Ministry of
Finance has established close relationships with
32
The IASC Foundation Constitution, Part A, states its aims
as follows: to develop, in the public interest, a single set of high
quality, understandable and enforceable global accounting
standards that require high quality, transparent, and compara-
ble information in nancial statements and other nancial
reporting to help participants in the worlds capital markets and
other users make economic decisions (italics added).
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
the IASB. Internationally standardized accounting
may promote transparency of international busi-
nesses and economies in the way that they are
economically true for shareholders and inves-
tors (Suzuki, 2003a, pp. 8890; Suzuki, 2003b, p.
507). It may contribute to increased foreign invest-
ments for now; however this does not justify the
full and uncritical implementation IAS/IFRS in
China, unless the impacts of IAS/IFRS is proven
to be conducive to the attainment of sustainable
growth of the economy and environmental protec-
tion within the framework of Marxist framework
(CASS, 2006). As IAS/IFRS has been a Brave
New World or a experiment, China also has a
potential to develop an alternative accounting
framework which would better suit the local his-
tory, needs and government policies. This does
not imply that the new accounting framework
has to contradict to the framework of IAS/IFRS.
China may well utilize IAS/IFRS, and to modify
IAS/IFRS to make Chinas rms and economy
more sustainable than merely growth ori-
ented. As Japans new accounting changed the
public perception of the roles of companies and
the economy, there may be a further developed
accounting framework which can lead the Chinese
businesses to grow in a sustainable manner. In
considering these questions, the subsequent history
of Japanese accounting in Part II will hopefully
oer some more useful comparative bases.
Acknowledgements
I acknowledge, with thanks, various helps from:
Anna Yip, an anonymous reviewer at IPA confer-
ence (Manchester), Jinzhu Chen, Jyunichi Chiba,
Late Professor Alec Cairncross, Chris Chapman,
David Cooper (Comments at AAA-BAA confer-
ence, 2000), Colleagues at Hertford College
(Brock, Cima, Creighton, Davies, James, Night,
Mehta, Tan and especially Greg Hill and Zhijing
Lim), Late Professor John K. Galbraith, Fiona
Anderson-Gough, Hideki Fujii, Trevor Hopper,
Anthony Hopwood, Irvine Lapsley, Hiroshi
Nakamura, Late Professor Nobuko Nose, Late
Professor Mark Perlman, Paolo Quattrone, Keith
Robson, Norman Macintosh (Reviewer at AAA-
295
BAA conference, 2000), Katsunobu Mandai, Peter
Miller, Yoshiki Nomura, Sta of Seikei University
Library, Miwa Nishino, Late Professor Shigeto
Tsuru, Shyam Sunder, Stephen Ze, The Institute
of Statistical Research, two anonymous reviewers
of this journal, and Yoshihiro Tokuga. (After
interviews with the author, ve Professors, who
were actively involved in the development of
accounting in the second half of the twentieth cen-
tury, passed away. May their soul rest in peace.)
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List of Interviews
John Kenneth Galbraith (Late Emeritus Professor of Econom-
ics at Harvard University; Chief of OaEED, USBSS; A
close friend of Shigeto Tsuru.) His home in Cambridge,
MA, USA, October 2003. On the activities of OaEED and
Michael Sapir and on the implementation of national
accounting in Japan.
Tsuru Shigeto (Late Professor Emeritus of Hitotsubashi Uni-
versity; Close friend of Galbraith; Deputy Chief of Eco-
nomic Stabilization Board; Author of the rst Japanese
economic White Paper.) August 1998, a telephone interview
(at International House of Japan, Tokyo). On the imple-
mentation of national accounting in Japan.
 T. Suzuki / Accounting, Organizations and Society 32 (2007) 263301
Yoshimasa Kurabayashi (Professor Emeritus of Hitostubashi
University; Former Chief of UN statistical oce.) (July 1998
at Toyo Eiwa University; 2003 at Hitotsubashi University).
Nobuko Nose (Late Professor of Economics at Himeji Dokkyo
University. One of a few pioneers of national accounting in
Japan): 3rd and 7th July, 1998, at Himeji Dokkyo Univer-
sity, Japan. On the development of Japanese national
accounting, with particular reference to the transfer of
knowledge from abroad.
Sir Alexander Kirkland Cairncross (Late Professor of Eco-
nomics; known as Sir Alec Cairncross; After gaining
postgraduate degree from Cambridge, he became a Lec-
turer/Professor/Fellow of Economics at Glasgow, Oxford,
LSE, etc.; Economic Adviser to Board of Trade., HM
Government, OEEC, etc.. Extensively published on the role
of economists in the Government.): July 1997, at his home
in Oxford, UK. On the development of national accounting
and its impact on modern economics.
301
Nita Watts (Former Professor of Economics, Oxford; she also
worked for the Government in which she helped developing
national accounts): July 1997, at St. Hildas College in
Oxford, UK. On the development of national accounting
and its impact on modern economics.
Hiroshi Nakamura (Former Professor of Economic Statistics;
Daito Bunka University, Japan): July, 1998, at his home in
Tokyo. On the development of Japanese economic
statistics.
Yoshiki Nomura (Former Professor of Economic Statistics;
Osaka City University): July 1998 at Osaka City University.
On the development of Japanese economic statistics.
Jyunichi Chiba (Former student of Kiyoshi Kurosawa, Profes-
sor of Accounting and Director of Economics Department
at Tokyo Metropolitan University): Many communications
in various forms from 1997 onward. On Kurosawas
accounting and development of Japanese accounting
regulations.