Itochu, Japan’s third-largest trading house, has come under a rare attack by a US activist short-seller who questioned its accounts over a $1.5bn investment in Colombian coal mining assets.

The Japanese group on Wednesday said that it has taken proper accounting measures and disputed the allegations made in a critical report issued by Glaucus Research, a California-based short-seller, which accused Itochu of overstating its net profits by ¥153bn ($1.5bn) in the 2015-2016 financial year. In a statement, Itochu said its books have been approved by its auditing firm.

Shares in Itochu were down 8.8 per cent in morning trading, in a broader market that was up more than 1 per cent.

Itochu has become a favourite of investors in the sector after establishing itself as the most profitable among Japan’s five trading houses. For the financial year that ended in March, Itochu reported a net profit of ¥240.4bn, compared to a profit of ¥300.6bn the previous year.

With a strong focus on non-resources sectors such as food and textiles, the company has weathered the global commodities rout better than bigger rivals such as Mitsubishi Corp and Mitsui & Co that reported their first annual losses in more than six decades.

But in its report, Glaucus questioned why Itochu has not booked any losses on its $1.5bn acquisition of a 20 per cent stake in Colombian coal assets owned by Drummond, a family-owned US mining company, in 2011. Since the deal, the price of thermal coal has collapsed.

Analysts have raised similar questions in the past, but Itochu has said it does not need to take a writedown since it has revised its joint venture contract with Drummond and reclassified its stake on its books.

Some of the Glaucus allegations relate to well-known issues about the carrying value of investments on Itochu’s balance sheet. Many of the concerns are known to investors and raise questions about book values rather than cash flows.

Shareholder activism has made a modest comeback in Japan on the back of Prime Minister Shinzo Abe’s corporate governance campaign urging companies to put cash piles to use and boost returns to shareholders.

Over the past three years, US activist investor Daniel Loeb has scored victories with his investments in robot maker Fanuc and retailer Seven & i Holdings.

But public attacks by activist short-sellers in Japan are still unusual.

Glaucus has previously targeted Asian companies including Singapore-listed China Minzhong Food and Hong Kong-listed Ozner Water International, but Itochu is its first subject in Japan.

“Prime Minister Abe’s commitment to corporate governance and transparency requires that Japanese markets be open to a dialogue of investment opinions. At the same time, we think there has been an absence in the market of critical analysis of highly questionable accounting decisions by companies such as Itochu,” said Soren Aandahl, director of research at Glaucus.

Additional reporting by Robin Harding