Private Enterprise in Japan - History

History

Japan's postwar business system dates back to the dissolution of the zaibatsu during the Allied occupation. Central holding companies were dissolved and families and other owners were compensated with non-negotiable government bonds. Individual operating firms were then freed to act independently. At the same time, the government instituted antimonopoly legislation and formed the Fair Trade Commission. Together with agricultural land reform and the start of the labor movement, these measures helped introduce a degree of competition into markets that had not previously existed.

It was not long, however, before the spirit and the letter of these reform laws were neglected. During the 1950s, government guidance of industry often sidestepped the provisions of the law. While market forces determined the course of the vast majority of enterprise activities, adjustments in the allocation of bank credit and the formation of cartels favored the reemergence of conglomerate groupings (keiretsu). These groups competed vigorously with one another for market share both within and outside Japan, but they dominated lesser industry.

In contrast to the dualism of the prewar era--featuring a giant gap between modern, large enterprises and the smaller, traditional firms--the postwar system is more graduated. Interlocking production and sales arrangements between greater and smaller enterprises characterized corporate relations in most markets. The average Japanese business executive is well aware of the firms that lead production and sales in each industry and is sensitive to minute differentiations of rank among the many corporations.