Japanese bad debt art sales speed up

by Georgina Adam

Sales of art from Japan’s troubled banking and financial sectors have accelerated markedly in the last few months, as the clean-up of bad debt in the industry heads into its final chapter. Two key elements are forcing more and more art out onto the market. In April the government formed a Resolution and Collection Corporation (RCC) to manage and dispose of Y9.5 trillion ($76.6 billion) or more of bad loans at banks and financial institutions. In addition, from next year Japanese companies will be adopting consolidated accounting practices, which will make it more difficult for them to hide bad loans in dummy or subsidiary companies.

A dramatic case concerns the Long Term Credit Bank of Japan, which was put under state control last year after a spectacular crash revealed a capital deficit of 2.65 trillion yen ($22 billion) Two of the bank’s employees, including the Osaka office chief, committed suicide in May, and in June this year three former top-ranking executives were arrested for allegedly falsifying the books to hide bad loans.

Among LTCB’s non-performing assets was a massive horde of artworks taken as collateral against loans. The bank will not comment on the issue, but a press report claims that LTCB has already sold nine works for about Y700 m ($5.8 m) including Millet’s End of the Day, Monet’s House in Giverny, Utrillo’s Restaurant in Marseilles and Pissarro’s Le Chateau de Busagny. The Millet work cost more than Y400 million during the Bubble, but its value is now just Y150 million, according to the same report. More paintings from the LTCB were put into auction at Shinwa on 12 June, but not identified as such. The sale made 848,340,000 yen ($7.045 million) and was 88.9% sold by value. Of the paintings thought to come from LTCB, the major lot was Picasso’s 1947 Femme au Chapeau estimated at Y 55/75 m ($447,000/600,000) which made Y 88 m ($730,833). It last appeared on the market at Sotheby’s London in June 1989 where it sold for GBP 700,000.

Works from the failed Yamaichi and Sanyo Securities have been sold at auction and by private treaty in Paris, claims Tokyo dealer Kiyonori Yamamoto. Mr Yamamoto, (whose Galerie Kiku was fined Y350 million, $2.68 million, for tax evasion in 1991) has formed a new company, International Auction Organisation, specifically to dispose of Japanese bad-debt art. Its "French Headquarters Committee" includes French auctioneer Marc-Arthur Kohn and art dealer Claude Kechechian. Yamamoto also claims to be talking to Kohei Nakabo, prowerful head of the RCC, about handling more Japanese bad-debt art. However he is meeting resistance in Japanese banks - "they just don’t want to acknowledge or admit that the value of their artworks has taken such a dive," he notes.

Another comparable case concerns the Japanese textile magnate Toshio Kida who in 1992 announced that he would donate a 20 billion yen (about $160 million at the time) collection of Japanese and Western paintings to the provincial Takarazuka Museum near

Kobe. However after promising the donation Kida used the artworks to secure some 10 billion yen ($80 million) in loans from the Osaka-based Kofuku Bank, which was declared insolvent in June.

The artworks have been seized, and Takarazuka is now reviewing the whole

plan of building a museum, which was originally due to open in 1996 but

delayed after the 1995 Kobe earthquake.


On 9 June the trial began in Tokyo of Harunori Takahashi, 53, accused of breach of trust and mismanagement of over Y22 billion ($180 million) in two credit associations, which he allegedly milked to prop up his now collapsed resort company EIE (Electronics and Industrial Enterprises) International. In the late 1980s LTCB loaned some 380 billion yen to EIE; this bank had bought extensively in the art market and gave artworks as collateral to LTCB in return for loans worth a reported 100 billion yen ($8 billion). The bank loans were so plentiful, once said Takahashi, that it was like "taking buckets of water from a running tap and filling a bathtub", leading to his nickname ‘The Man with a Trillion Yen."

In a fascinating twist, in the late 1980s EIE was Japan’s biggest foreign investor in Australia, where it bought hotels, a resort….and a stake in Bond University near Brisbane, Australia. This was named after Alan Bond, the rags-to-riches-to-rags tycoon who once borrowed from Sotheby’s to buy Van Gogh’s Irisis, and proved unable to pay for it. He is now serving a 10 year prison sentence for fraud. Bond University is currently believed to be "buying itself out" from the Japanese government (acting as a receiver for LTCB) for the sum of $105 million Aus Dollars (US$68 million), according to reports in the Australian Press.



A smart hard-back brochure introduces the new business venture of Kiyonori Yamamoto, President of International Auction Organisation. No stranger to the art market - in which he has worked for 25 years - Mr Yamamoto in his introduction says: "The 21st century will be the age of ‘Global Family’ with family and culture playing a significant role in determining trends in art markets…Art markets should be shared with a global vision." With this in mind he is forming a "bridge between Japanese, European and American art markets." His IAO comprises himself, two Japanese partners, French auctioneer Me Marc Arthur Kohn and a Parisian art dealer, Claude Kechechian.

Affiliated with IAO is United European Auctions, a company to be created "in 1999". Me Kohn explains that present French law precludes him from forming a commercial company but once the long-awaited auction reform is implemented, he will go ahead. In the meantime he has auctioned works from Japan at the Paris auction room Drouot and plans to continue doing so. Asked why France is a good choice for these paintings, he says, "the French have always been art lovers and there is a good market here for artworks in the $10,000 - $1 million range, and this way we can develop the French market."

Mr Yamamoto’s brochure illustrates - without printed prices, but he gave this writer a couple of prices orally - a number of artworks destined for sale in Paris, including Utrillo’s 1916 Notre-Dame de Clignancourt (about Y20 m, $165,000) and Monet’s Charing Cross Bridge (about Y8 billion, $6.6m). He says he sells at auction through Me Kohn and also through private treaty. Asked why he chose Paris and not London or New York to sell the artworks, he explains: "The European Union is very strong at the moment, and many of the paintings were originally painted in France, so it is normal to sell them there. In addition the Japanese provenance makes them difficult to sell in New York, whereas if they go into auction in France they can subsequently be sold on in the US or the UK, as if they are not from Japan."

Does a Japanese provenance still have a stigma?

When Kiyonori Yamamoto claims that sales in Paris of Japanese bad-debt art will in some way "wash away" the stigma of their Japanese origin, he is reflecting a widely-held belief that art buyers are wary of buying art acquired by Japan in the late 1980s. At the time, in their headlong rush to acquire artworks, the Japanese paid outrageous prices and acquired many mediocre or even fake pictures, relying on signatures and "brand names" alone. One dealer (an ex-Toyota agent, Masahiko Sawada) is famed for telling a buyer that a certain Miro was a "Corolla-style" model but that more deluxe models were available.

Michael Finlay of Christie’s concurs: "there is still resistance to Japanese buys," he says, adding, "particularly from Japanese buyers, who are frightened that bad-debt artworks may still have a lien on them." Confirming this in Tokyo, an art dealer (who asked for anonymity) said, speaking of the LTCB/Takahashi paintings:"I wouldn’t touch them. The whole issue of ownership is too complicated, you could have a real problem finding out who really has title."

Georgina Adam is a Tokyo-based freelance art writer and correspondent for The Art Newspaper and The Asian Art Newspaper.
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