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Japan Co. Has Huge Derivatives Loss

March 20, 1998

TOKYO (AP) _ A prominent beverage company that also owns a baseball team said today it lost about $813 million in speculative investments, the latest in a string of Japanese companies to reveal huge trading losses.

Yakult Honsha Co. Chairman Jun Kuwahara and Vice President Naoki Kumagai, a former Finance Ministry official, will resign over the loss _ equivalent to two-thirds of the company’s total revenue for the fiscal year that ended last March.

The speculative trading ``was begun to make up for losses which accumulated as a result of sluggish stock prices″ after the Japanese market peaked in 1989, Yoichi Yoshida, a Yakult senior managing director, told a news conference today.

The company was unaware of the full extent of the losses until December, he said.

Yakult is well-known in Japan for its popular yogurt-style drinks and its Tokyo-based professional baseball team _ the Yakult Swallows, which has won three of the last five Japan Series championships. The company has no plans to sell the baseball team, Nippon Television Network reported.

Yakult’s failed bet on derivatives will force it to post a net loss of about $740 million for the fiscal year ending this month, the company said. Yakult plans to shed about 300 workers over the next two years to try to return to profitability.

The company is but the latest in Japan to be pummeled by vast investment losses. Yamaichi Securities, one of the country’s largest brokerages, collapsed in November after racking up losses in off-book accounts.

Two years ago, Sumitomo Corp. announced that it had lost $2 billion in unauthorized copper trading. The year before, Daiwa Bank suffered more than $1 billion in losses.

Yakult’s trading setbacks apparently were triggered by currency volatility caused by the economic turmoil affecting much of the rest of Asia, the Nihon Keizai financial daily reported today.

Shares of Yakult Honsha listed on the Tokyo Stock Exchange last bid at 760 yen ($5.85), down from Thursday’s close of 820 yen ($6.30).

Analysts estimate that Yakult has roughly 10 percent of Japan’s $10 billion non-alcoholic beverage market. It also sells drinks in Europe, South America and Southeast Asia.

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