Nippon Sanso lost ¥11.9B on interest rate swaps — an industrial gas company's trading loss

Nippon Sanso was a Japanese industrial gas company, supplying oxygen, nitrogen, and other gases to manufacturers. The company was a non-financial firm with no business in complex derivatives trading.

In 1995, Nippon Sanso lost ¥11.9 billion ($120 million) on interest rate swaps — a derivative contract that exchanges fixed-rate for floating-rate interest payments. The company had taken large speculative positions in these swaps, betting on a particular direction of Japanese interest rates. When rates moved the wrong way, the losses mounted quickly.

The case was part of a wave of Japanese corporate derivatives losses in the 1990s, where non-financial companies used their treasury departments to speculate on financial markets. These companies lacked the risk management infrastructure of financial institutions but were placing bets of similar size. Nippon Sanso was later restructured and merged into Taiyo Nippon Sanso.