Tateho Chemical lost $340M on bond futures — and showed Japan what zaitech could cost

Tateho Chemical Industries was a medium-sized Japanese manufacturer of ceramics and magnesium oxide. It was a conventional industrial company, not a financial institution.

In 1987, the company revealed that it had lost approximately JPY 28.6 billion ($340 million) speculating in Japanese government bond futures and the cash bond market. The company had built a position of at least 100 billion yen in the Tokyo bond market — vastly exceeding its net worth of about 17 billion yen.

The loss was part of the 'zaitech' (zaiteku) phenomenon of the 1980s, where Japanese companies used their corporate funds for aggressive financial speculation rather than core business operations. Tateho was a particularly extreme case: a ceramics company with no bond trading expertise was betting 6 times its net worth on government bonds.

The news sent the Nikkei down 296 points and sparked fears that other Japanese companies might report similar losses. The Bank of Japan tightened controls on bank lending for speculative investments. Tateho was rescued by Taiyo Kobe Bank, and later taken over by Daido Sanso KK, an industrial gas manufacturer.