Accounting revolutions in Japan

              The Accounting Historians Journal Vol. 16, No. 1 June 1989
Kyojiro Someya WASEDA UNIVERSITY
ACCOUNTING "REVOLUTIONS" IN JAPAN
Abstract: Japan's rise from a feudalistic economy to a position as a leading industrial power is a result, in part, of two revolutionary changes in its accounting structure. The first change came during the latter part of the nineteenth century as part of the Meiji Government's program of modernization. Various political, eco-nomic, and cultural institutions were adopted from the West, among them the double-entry method of bookkeeping; this method gradually replaced very unsatisfactory traditional methods. The second change came after World War II, when the Allied Command set as its objective the destruction of the Zaibatsu-dominated industrial structure and its replacement with a democratic economy, in which industrial capital is accumulated through the participation of investors in a free stock exchange. Such a change demanded a shift in emphasis from stewardship-oriented financial reporting to investor-oriented financial reporting.
Accounting history is the study of the evolutionary process in accounting thought, practices, and institutions. The focal point of such study is the dynamic interaction between ac-counting and its environment. This consideration of the ac-counting history of Japan, focuses on two significant events in the modern history of Japan that had revolutionary impacts on its accounting system.
The first of the two events, which took place in the latter half of the 1800s, involved the change from traditional diary-style bookkeeping methods to a modern system of accounting within a double-entry framework. The second revolutionary event, which occurred shortly after World War II, involved a virtually overnight change from Japan's traditional stewardship orientation to the investor orientation of financial reporting common in many parts of the world today. These two events are excellent examples of the fact that accounting cannot be under-stood in isolation, but that an analysis of accounting must include the economic, political, and diplomatic environments in which it is practiced.
The function of accounting is, obviously, to provide infor-mation relevant to the decisions of managers, shareholders, creditors, and other parties interested in the process an enter-