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Nearly four weeks after Olympus ignominiously fired its British born chief executive Michael Woodford after he questioned unusual billion dollar payments, the Japanese camera maker has admitted that it has undertaken fraudulent transactions dating back to the 1990s.

Trading losses are now estimated to exceed $1 billion (£630 million) which has undermined faith in Japan's corporate governance, and raised question marks over other Japanese companies' accounting practices.

'Trust in Japanese firms may be questioned as attempts by Olympus to hide losses stretch back to the bubble era, which brings up the question of whether other companies were involved in similar practices as well,' Natsuo Yamaguchi, head of the second opposition party, the New Komeito, told Reuters in an interview.

The revelation comes just days after Woodford referred the findings of an independent PwC investigation he had sanctioned into Olympus's finances to the Serious Fraud Office.

He had been fired after questioning three acquisitions, including a mail order skin cream company, and querying why advisory fees in excess of $680 million (£430 million) had been paid for an acquisition that had been undertaken without board approval.

Olympus shares have since fallen more than 70 per cent as the camera company and its former boss entered a public dispute about the circumstances surrounding his departure.

Olympus accused Woodford of being disrespectful but he retorted with high profile interviews with leading newspapers claiming that he had been fired after having the audacity to question anomalous transactions.

But the Japanese business community was rocked on Monday by the bowed head admission by Olympus president Shuichi Takayama that the company did undertake fraudulent transactions dating back to the 1990s.

He blamed former chairman Tsuyoshi Kikukawa, who quit as president and chairman on 26 October, and two other senior management staff.

The admission was a key moment for Olympus but experts now believe that it faces a long road to recovery. Even if the 92 year old company survives this crisis, is it possible to truly rebuild reputation after a crisis of this magnitude?

'In a crisis situation we would always say you have to deal with it in the first 48 to 64 hours, it has to be as quick as possible but they prolonged it and dragged it out,' says Mark Hutcheon, associate partner, at Reputation Inc.

'The longer you refuse to tell the truth, the more it will eat away at the brand.'

Tim Johns, partner at Change Agency, thinks nothing short of a radical overhaul of the organisational structure will do. 'This is a corporate governance issue and the only solution is to rebuild credibility from fresh. The company needs a fresh pair of eyes,' he says. 'No one will trust someone who has presided over the previous period of mismanagement.'

But sacking an entire board could be a risk if there are not any suitable successors internally. Oil giant BP was fortunate in a sense that it was able to appoint a credible successor from inside when Tony Hayward eventually quit.

Johns notes that getting external auditors in is the first critical step. 'You have to open the books, all in one big go and you need to do it all as quickly as possible,' he says.

'Finally you need reform. The maximum size of a board should be ten at the most, eight is better but the Olympus board is far too big.'

The scandal has once again highlighted the pitfalls of Japanese corporate culture. 'From a national brand point of view it suggests that governance structures amongst the senior elite are not robust,' says James Thellussun, head of corporate affairs at Lexus PR.

Hutcheon also thinks the Olympus saga is a red flag for business in Japan. 'That kind of management culture does not breed accountability and allows things like this to go unnoticed,' he says.

Influential members of the Japanese business community have already realised this. In a bid to help salvage Japan's credibility as a place to do business, senior politicians and representatives from the Tokyo Stock Exchange urged the company to act quickly to address the scandal, which they feared could deter western managers from pursuing a career in the country.

But the damage may have already been done to Japan's reputation. 'I think it could be difficult if you were trying to market Japanese retail funds to UK retail investors right now as the ousted chief executive has been all over the papers here,' adds Thellussun.

Out of touch

Putting aside the governance issues, the company has displayed an archaic approach to media relations. 'The company's 80 year old chairman has only spoken through staged press conferences held for a handpicked selection of journalists. They have made no effort to explain their side of the story; it's just been a series of chairman's statements,' notes Hutcheon.

So where do they go from here? Olympus needs more than just a rebrand, say the experts; it needs a complete overhaul followed by a complete rethink. 'You need to engage with external stakeholders. You need a bottom up values-driven approach to rebuilding reputation,' Johns suggests.

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