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What factors do you consider to be primarily responsible for the Japanese accounting
system being significantly different from other national systems and what influences do
you consider the Japanese system will have on international accounting in the future?
INTRODUCTION
Japan as an accounting jurisdiction is characterized by the dominance of the state (Haller
and Raffournier, 2003). The accounting rules have been set out in the past fifty years as
statute law with an implicit objective that accounting should contribute to the growth of
the national economy (Haller and Raffournier, 2003). Until recently, the accounting
profession had played a minor role in shaping accounting practices, and he accounting
profession and auditing practice was created by law after World War II as a discipline
needed to reactivate the securities market in Japan (Haller and Raffournier, 2003). Going
back in time would show that industrialization of Japan began in 1868 after the Meiji
Restoration (Nobes and Parker, 2004). In 1890 and 1899, the first Commercial Code was
established based on a Franco-German model and oriented towards creditors and tax
collection (Nobes and Parker, 2004). A deeper look at Japan accounting and financial
reporting reflects a mixture of a number of domestic and international influences (Choi et
al., 1992), with the first half of the twentieth century having the accounting thinking
drawing influences from France and Germany (Lawrence, 1996), and the second half from
the United States, that emphasizes on shareholder information (US) (Choi et al., 1999).
Because Japanese accounting system bents more to tax influences, it is classified as the
uniform accounting approach (Choi et al., 1992). In addition, following the Hofstede and
Gray framework would put Japan under the conservatism or masculinity cultural
classification (Choi et al., 1992). However, it is widely known that Japan accounting
system differs significantly from other national systems; therefore this paper is to discuss
the factors for the differences and to consider whether the Japanese system will have any
influence on international accounting in the future.
LEGAL SYSTEM AND STANDARD SETTING
In terms of legal and institutional basis of accounting, the national government has the
most significant influence on accounting in Japan (Arai and Shiratori, 1991 cited from
Nobes and Parker, 2004). There are three main sources of regulation, all imposed by the
government and administered by two separate ministries (Lawrence, 1996). The Ministry
of Justice (MoJ) is responsible for the Commercial Code; the Ministry of Finance (MoF) is
responsible fro the Securities and Exchange Law, the tax law and regulations and the
