By
Andrew H. Thorson
This
Article is Part II of a series that explains the origins
of the Japanese corporate complexes that have characterized
Japan’s modern economy. Part I explained the origins
of pre-WWII zaibatsu. This part discusses the dissolution
of the zaibatsu and origins of the current company
groups known as the keiretsu.
Zaibatsu Dissolution: As
explained in the previous article, by 1945
the zaibatsu had grown to control a significant
portion of Japanese trade and industry. During
the Allied occupation, the zaibatsu were liquidated
in order to “democratize” Japan’s
economy. In addition, for the purpose of controlling
concentrations of economic power, special provisions
were included in Japan’s Antimonopoly
Act for the specific purpose of forbidding
holding companies and limiting the acquisition
by financial enterprises of stock of other
companies. In hindsight these provisions might
appear to have been ineffective barriers to
the creation of excessive economic control
and equally ineffective as measures to ensure
competition in Japan’s economy. These
arguments were made when Japan enacted the
Act for partial Amendment of the Antimonopoly
Act in 1997 by which act Japan finally eliminated
the 50-year old ban on holding companies.
The zaibatsu were dismantled by (i) destruction of pyramid control
structures via liquidations, (ii) public dispositions of zaibatsu-owned
shareholdings, (iii) reorganization of large existing monopolies, and (iv)
strengthening of the legal prohibitions on monopolies and unfair competition.
The Imperial Order of 1946 Concerning the Restriction, etc., of Securities
Holdings by Companies also forbids certain interlocking relationships among
former zaibatsu members via personnel, shareholding, loans, and
contractual ties. In all, 1200 companies and 56 individual members of zaibatsu families
had their assets frozen and transferred to what was known as the Holding
Company Liquidation Commission.
Political Overtones of Dissolution: While
the Allied presence influenced the dissolution of the zaibatsu,
there are also suggestions that bureaucrats in Japan
desired to liquidate the zaibatsu for political
reasons of domestic politics, including perhaps for
the purpose of strengthening the Ministry of Finance’s
(MOF) control over Japan’s economy. From the
late 1930’s, powerful Japanese stockholders were
also under public attack for emphasizing private profit
interests over what were perceived to be public interests
and the interests of labor. On the domestic level,
zaibatsu became targets of social resentment, and managers
of leading zaibatsu were sometimes even subject
to terrorist attacks. The theory that zaibatsu dissolution
implicated a power coup between the MOF and the zaibatsu
rather than a real desire to eliminate concentrations
of economic power is arguably consistent with the circumstances
which followed dissolution, namely, the emergence of
new and powerful corporate groupings in Japan.
New Corporate Groups – Emergence of Keiretsu: Within
years of dismantling the zaibatsu, changes on both
the domestic and international fronts are thought to
have led to a relaxation of regulations upon the concentration
of economic power in Japan. On the latter front, following
the establishment of communist China, U.S. foreign
policy toward Japan could be seen shifting to one supporting
a shoring up of Japan’s economic power. Secondly,
industrial growth and increased production capacity
in Japan supported the U.S. need for supplies during
the Korean War. Domestically, legislation in 1949 and
subsequently in 1953 relaxed restrictions under the
Antimonopoly Act. By 1953, financial companies were
permitted to own up to 10% of the outstanding shares
of non-financial companies and the prohibition upon
holding the stock of competing companies was eliminated.
Government policies in support of economic and industrial growth also tended
to promote a new pooling of resources and grouping of enterprises during
this period. When the Korean War ended and some large industrial companies
faced over capacity problems, governmental policies supported greater cooperative
efforts among enterprises. For example, in 1953 the Ministry of International
Trade and Industry’s (MITI, now known as METI) Industrial Rationalization
Counsel called for the grouping of trading and manufacturing companies to
concentrate scarce capital in the domestic economy. Antimonopoly restrictions
were also relaxed during this period. In this environment the currently existing
corporate groups began to crystallize.
By the 1960’s six “quasi-zaibatsu” had emerged,
including the following groups: Mitsui; Mitsubishi; Sumitomo; Fuyo; Sanwa;
and Dai-Ichi Kangyo. Of these six, Mitsui, Mitsubishi and Sumitomo have been
called the most direct successors of the pre-war zaibatsu. In contrast to
actual zaibatsu, however, large financial institutions, under the
influence of MOF, have been said to play a central role in corporate governance.
The current groups are arguably so substantively different from original
zaibatsu that it could be misleading to refer to them as “quasi”-zaibatsu.
As will be explained in Part III of this series, the current company groups
that we often loosely lump together and refer to as keiretsu¸ include
horizontal and vertical company relationships, and sometimes business ties
that are held together not by capital but by mere transactional relationships
among enterprises. The central role of main banks in corporate governance
greatly distinguishes these groups from the zaibatsu.
The views of the author are not necessarily the
views of the firm of Dorsey & Whitney LLP, and
the author is solely and individually responsible for
the content above.
