Japan signaled plans to strengthen disclosure rules on mergers and acquisitions after a $1.7 billion accounting fraud at Olympus Corp, one of the nation's worst corporate scandals, which involved a series of shady deals.

Financial Services Minister Shozaburo Jimi told reporters that Japan's financial regulator and the Tokyo Stock Exchange would both look for ways of improving disclosure on M&A deals.

As the resolution of this (Olympus) case proceeds, there is a need to check the workings of the system and discuss policies to prevent a recurrence, Jimi told reporters.

Jimi declined to give specifics, saying these had yet to be worked through. He did not give a timeframe.

Japan's regulator will consider requiring that firms disclose fees paid to advisers and information on acquisition targets, although it will likely look to set thresholds for disclosure based on the size of the deal, two sources familiar with the matter said.

If you are too stringent, if you require everything to be disclosed, there is a risk that it could discourage M&A, said one of the sources, who was not authorized to speak publicly about the matter.

Setting strong disclosure rules could set a precedent for Asia.

In the United States, companies often detail M&A transaction details. But it is rare to get such publicly available information in Asia.


Olympus, a maker of cameras and medical equipment, spent hundreds of millions of dollars on dubious M&A deals as part of an accounting deceit which hid investment losses from investors for 13 years.

The M&A payments included an exorbitant $687 million advisory fee paid mostly to a now-defunct Cayman Islands firm, which did not come to light until former CEO Michael Woodford blew the whistle on the deal after he was sacked two months ago.

Worth about a third of the deal value to which it related, it ranks as the world's largest takeover advisory fee on record.

The scandal has sparked criticism of Japan's corporate governance and disclosure practices and has also spurred major political parties to consider possible reforms.

Olympus has lost more than half its market value since the scandal broke in October, when Woodford went public with his concerns over the massive advisory fee and other deals.

Woodford now wants to be reinstated and to replace the entire board with his own slate of candidates. The current board plans to resign soon but wants to choose its own successors, setting up the prospect of a proxy war over who will lead Olympus out of the crisis.

After restating its accounts this week, Olympus is under pressure to repair its balance sheet by forging an equity alliance, selling assets or raising fresh capital.

Senior Olympus executives including President Shuichi Takayama told a meeting of creditors on Friday that the company would issue a business plan in early May that could include an equity tie-up to shore up its weakened financial position, a person who attended the meeting said.

The company's main lender, Sumitomo Mitsui Banking Corp, also agreed at the meeting to continue its support for the company, the person said.

The business plan is still a long way off and would come after the firm's target date for an extraordinary shareholders' meeting in March or April, which is expected to install a new set of board members that could lead the company out of the scandal.

But Woodford and several major foreign shareholders are agitating for a faster replacement of the board and argue that its current members, tainted by the scandal and their past approval of the dodgy M&A deals, should not be allowed to choose their successors or set the company's future course.

Olympus also said on Friday that after the restatement of its accounts for the past five years, some of its dividend payments exceeded what should have been permissible at the time. A committee it has set up to investigate managerial and auditor issues will look into whether the payments involved a violation of due care of manager requirements under the law, it added.

Olympus' stock fell 3.6 percent to 1,004 yen on Friday. It has fallen by nearly 30 percent since it released its restated accounts and is down 60 percent from pre-scandal levels.

($1=77.88 yen)

(Additional reporting by Taro Fuse and Lisa Twaronite in Tokyo and Michael Flaherty in Hong Kong; Writing by Edmund Klamann and Nathan Layne; Editing by Neil Fullick and Joseph Radford)