Japanese PM Yoshihiko Noda is concerned that the recent Olympus scandal will tarnish Japan's reputation as a rules-based market economy. The scandal is over claims by Michael Woodford, former president and CEO of the Japanese camera maker, that he was dismissed because he asked awkward questions about around $1billion of missing funds.
Prime Minister Noda is right to be concerned. It's not clear yet what happened at Olympus. Some suspect bribery or money laundering, but others float more benign explanations. Arguably though, whatever the eventual truth, the mere raising of suspicions will be damaging - to both Olympus and Japan.
Sceptics argue that the business world will not be deterred from promising business opportunities in Japan just because of a scandal at one company. But Prime Minister Noda has identified an important problem. The world now has doubts about how business is done in Japan, what the norms are, and to what extent they clash with the broadly 'western' norms of transparency and free competition.
Moreover, the experts that are consulted by Transparency International for its annual Corruption Perceptions Index may now rate Japan as more corrupt than in previous years. That will feed through into a drop in the country's ranking, and that in turn will be used by companies when they consider investing in Japan. In other words, thanks to the widespread use of the CPI, suspicions get institutionalised into business decisions relatively easily these days. The CPI has emerged as an important 'intermediary' for a country's reputation for corruption.
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