Monthly Archives: May 2013

At the Heart of Japan’s Success and Failure: the Keiretsu-Part Three

For Part One go here

For Part Two go here

The ’50s, due to both the end of US meddling in the Japanese economy and improved general conditions in Japan, saw the broken remains of the zaibatsu morph into the keiretsu, the modern day “conglomerates” which have defined Japanese economic life ever since.
The keiretsu is a different institution that the US corporation or the European multinational. It can be defined as a group of firms (ranging from the gigantic to middle-sized family owned enterprises) tied among themselves by cross-shareholding, informal ties and, much more critically, the use of a common main bank and sogo shosha (often translated as trading house) which constitute the true beating heart of the keiretsu. Very much like an onion, a keiretsu is made up of “layers” of companies: however being close to the core does not mean being a huge company. Toyota, for example, belongs to the most external layer of companies of the Mitsui keiretsu despite being one of the world’s largest manufacturing companies. The same can be said for Matsushita Electronics and Sumitomo.
It’s very hard to explain the concept of layers. For a Japanese “it’s just the way it is”. Positioning is affected by a huge number of factors, such as the entity of loans taken from the core bank, cross-shareholding patterns and tradition. In some keiretsu, companies which can directly trace their lineage to the original zaibatsu are held to be “closer to the core” despite not having being major players for decades.

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