The impact of external pressures (gaiatsu) and internal pressures (naiatsu) on Japan's accounting reforms since the late 1990s

Purpose - The paper extends the literature by examining the impact of politics, conflicts and compromises resulting from external pressures (gaiatsu, 外圧) and internal pressures (naiatsu, 内圧) on the convergence and globalization of accounting and accountability in Japan. Design/methodology/approach - Using Japan as a case study, it is examined how and why the stimulus for significant accounting reforms arises, how the government manages and reacts to the powerful forces ofgaiatsuand how it balancesnaiatsuamong key stakeholders. Findings - The ongoing changes in accounting regulations in Japan are neither the result of an unmediated response togaiatsunor the outcome ofnaiatsu. Rather, Japanese accounting changes are the consequence of complex external interactions and internal compromises. Specifically, Japan demonstrates a repetitive pattern of conflict management, which alters the domestic power balance based onnaiatsu, and forces the Japanese government to make compromises to policy changes initiated bygaiatsu. Research limitations/implications - The findings have implications for the development of accounting and accountability, the globalized business world and international accounting research because they challenge claims made by global standards setters that international standards such as International Financial Reporting Standards are superior, are built on so-called “best practices” and are relevant to all countries. Originality/value - Invoking the concepts ofgaiatsuandnaiatsuis a critical approach to understanding Japan's convergence toward economic liberalism and Anglo-American models of accounting and accountability.