Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

(Corrected )

Anyone watching Toshiba's stock plunge on Thursday, capping a 61 percent loss in the past 12 months, would be tempted to predict the company is on its way to extinction, or at least bankruptcy. That might be true, were Toshiba a U.S. company. Not in Japan.

Toshiba shares dropped 8 percent after Bloomberg News reported that the U.S. Justice Department and the Securities and Exchange Commission are probing the electronics maker's accounting. U.S. authorities are scrutinizing allegations made in an internal review published last year by the Tokyo-based company, people familiar with the matter said. The report, a 334-page version of which was published in English on Toshiba’s website in December, said management was complicit in padding profits for almost seven years. It led to the resignations of top officials, including Hisao Tanaka, Toshiba’s president and chief executive officer.

Dim Picture
Toshiba is facing accounting questions in Japan and now the U.S.
Source: Bloomberg

Adhering to a long tradition of avoiding job cuts, Japan has kept a host of zombie companies alive. Sharp, in talks to sell itself, is potentially the best and most recent example. Airbag maker Takata, at the center of a global safety crisis, is also down 60 percent in the past year. Those betting it will fail may be indulging in wishful thinking.  If things get out of hand at Toshiba, investors can be sure it will join the ranks of the Japanese corporate undead.

Blow-Up Notwithstanding
Takata shares are down 60 percent in the past year as it became the epicenter of a car safety crisis
Source: Bloomberg

Over the past decade, Japan has seen fewer high profile bankruptcies than the U.S., with Japan Airlines arguably the most publicized. There were 8,812 bankruptcy filings that had a debt value of more than 10 million yen ($89,560) in Japan last year, versus 24,636 business failures in the U.S., according to data compiled by Bloomberg.

Sway But Don't Drop
Accountants have questioned several times Sharp's ability to remain a going concern in the past two years
Source: Bloomberg

Those who pay the price to keep Japan's zombies alive, most of the time, are banks and Japanese savers. In the West, any company being investigated for accounting issues or, as in the case of Sharp, whose survival is in question, would face a more difficult time getting financing. In Japan, lenders continue to supply the cash needed to keep lifetime jobs at large companies intact.

Akio Morita, Sony's co-founder, wrote in his 1986 bestselling memoir  that the concept of lifetime jobs in Japan stemmed from the common need of managers and employees to make long-term plans. Since the 1980s, markets have changed, consumers have shifted their habits and Japan has become an aging society with a shrinking population. The concept of lifetime employment remains untouched, however. 

Whether it's a matter of allowing unprofitable companies to remain afloat or propping up a national champion in the crosshairs of foreign regulators, survival remains the imperative for Japan Inc.  Toshiba -- and Takata or Sharp -- may stumble, but there will always be someone there to catch them before they fall.

With Japan's economy continuing to struggle, the existence of zombie companies shows the need for the so-called third arrow of Abenomics. Until Japan ends its lifetime jobs and no-company-left-behind policy, the country won't find its way back to sustainable growth.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects reference to number of bankruptcies in Japan over the past decade in fourth paragraph.)

To contact the author of this story:
Christopher Langner in Singapore at

To contact the editor responsible for this story:
Matthew Brooker at