Japan seeks bigger say on global accounting rules

Tokyo will likely drop its insistence on using its own accounting rules and instead adopt international standards, but it wants more say in writing the rules so they reflect Japanese business practices.

Now asserting itself on rule-making, over which the European Union and the United States have long held sway, Japan is also aiming to build a coalition among Asian-Pacific countries, an industry official said.

Japanese companies can voluntarily use International Financial Reporting Standards (IFRS) - followed in over 100 countries including the European Union, but not the United States - from this year.

That is seen as a step towards full adoption of IFRS, expected around 2015, although no formal decision has yet been made.

"In the past, it was as if we were trying to wrestle from outside the ring. But now it's different. We'll be using (IFRS). That makes a whole lot of difference," said Noriaki Shimazaki, a top official in charge of accounting rules at Japan's biggest business lobby.

"And we also have to think about how we can avoid being knocked out of the ring," said Shimazaki.

Japan has been long wary of replacing its own accounting rules with those of the International Accounting Standards Board (IASB), which some say pays scant attention to Japanese requests.

"We cannot simply accept what the IASB has created. We must raise our opinions so that the rules that are not in line with our business practices are amended, or will be followed up with proper guidelines," said Shimazaki, who is also a trustee of the foundation that oversees the IASB.

The IASB is a privately funded accounting standard setter.

Out of 15 seats on its governing board, five are occupied by Europeans and four by the United States and just one from Japan. Some Japanese accountants argue they are under-represented, making them reluctant to follow international rules.

Still, fear of being isolated if it sticks to its own rules persuaded Japan to accept the IFRS last year. Since then Tokyo has been stepping up efforts to shape the rules.

In one example, the IASB said banks can value bonds they do not plan to sell at cost rather than at market prices. That was in response to requests by Japanese banks, which hold large amounts of government bonds.

Japan's new government, which took office in September, is supporting efforts to play a greater role.

Deputy banking minister Kohei Otsuka said past governments failed to do enough to promote Japan's interests in global negotiations on regulatory issues such as the Basel agreement on banks' capital.

Shimazaki said Tokyo needs to work more closely with other countries in the region to increase its clout, which is dwindling even though Japan remains the world's second-largest economy.

"Japan can be a leader in the Asia and Oceania region. If we can come together with countries like China, Australia, India and perhaps South Korea, (the IASB) cannot ignore us," he said.

Australia already uses IFRS while South Korea and India are set to join around 2011 and China is also working towards making its rules conform with the IFRS.