The Relationship Between Financialization and Accounting Standards: A Japanese Perspective

This study considers global financialization in terms of the dynamics of corporate accounting standards. Accounting standards play a crucial role in financialization by measuring corporate financial performance. Since the definition of “financialization” is ambiguous, this interdisciplinary study can benefit future research. Taking the perspective of Ryuji Takeda, a legendary Japanese accounting researcher with knowledge of sociology, this study focuses on the transition from production-oriented accounting to finance-oriented accounting. This transition is analyzed using Jean Baudrillard’s concepts of “simulacra” and “hyperreality.” This study also analyzes the recent changes in Japan’s accounting standards as a backlash against excessive finance-oriented accounting. Further, the backlash is reconsidered from Takeda’s “spiral development” perspective. Although this study is essentially conceptual, data are presented in support of its argument, and its interdisciplinary perspective can further financialization studies.

This paper is structured as follows. The first section reviews studies on financialization and summarizes their essential points. The second section describes the relationship between the financialization process and accounting regulations (particularly accounting standard-setting) based on Takeda’s framework, which distinguishes between production-oriented and finance-oriented accounting. This framework introduces Baudrillard’s concepts of “simulacra” and “hyperreality” to explain the financialization mechanism by considering the transition from the former to the latter type of accounting. The third section focuses on the new dominance of finance-oriented accounting standards in Japan. Post-financial crisis Japanese accounting regulations such as the development of accounting standards for small and medium-sized enterprises are reexamined using Takeda’s theoretical framework. Finally, this paper argues that new accounting regulations have emerged through a spiral development within the bipolarity between traditional material production-oriented accounting and finance-oriented accounting as a reaction to excessive financialization and finance-oriented accounting standards.