Vanderbilt Journal of Transnational Law


Mitsuru Misawa

First Page



The New York Daiwa Bank scandal, which involved Daiwa Bank's concealment of $1.1 billion in losses from the illegal funding of U.S. Treasury bonds and the diversion of another $100 million in losses incurred by Daiwa Bank Trust Company, resulted in the most severe economic penalties ever imposed by the United States against Japan. These penalties included the termination of Daiwa Bank's U.S. operations and the reinforcement of the increased rates at which Japanese banks can borrow U.S. currency--the "Japanese premium." In addition, the Daiwa Bank case substantiated an international distrust of Japanese financial institutions, which are closely aligned with their governmental regulator, the Ministry of Finance. Despite the internationally-based opposition to Japan's regulatory and banking practices, Japanese authorities view the retaliatory steps taken by the United States as excessively harsh.

In this Article, the author compares the differing United States and Japanese reactions to the New York Daiwa Bank scandal on legal, economic, and sociological levels. Based on his analysis, the author concludes that cultural differences between the United States and Japan lie at the heart of the scandalous proportions of the Daiwa Bank incident. Furthermore, the author believes that the Daiwa Bank case offers an important lesson for Japanese companies with international operations: "When in Rome, do as the Romans do." According to the author, Japanese banks and other industries will eventually earn the trust of the international market by abiding by foreign laws and improving Japan's regulatory practices.