The Development of Large Enterprises in : An Analysis of the Top50Enterprises in the Profit Ranking Table(1929-1984)

By Hiroaki Yamazaki University of Tokyo

‡T.Introduction

My purpose in this paper is to outline changes in the composition of the50largest enterprises in Japan in relation to changes in the indus trial structure.Most Japanese economic historians have tended to only consider private mining and manufacturing industries in analyzing industrial structure.But it is essential not to neglect the electric power, railroad and government-operated heavy industries because these occupied an important place in Japanese industry as a whole before World War ‡U.Moreover,I would like to utilize an enterprise ranking table to outline changes in the composition of the50largest enter prises.In general,enterprises are ranked in terms of total assets or total sales,and the ranking tables are divided into mining and man ufacturing,public utilities,and trade and finance because the impor tance of scale when measured in these ways differs depending on the industry.I have therefore constructed a new ranking table based upon the net profit of each enterprise.In this way it is easy to evaluate the performance of all enterprises on the same basis.The period under observation is from1929to1984;the tables give data for1929,1943, 1955,1973and1984.The year1929immediately preceded the great depression and,as will be shown later,characteristic features of Japanese industrial structure dating from the Meiji era can be found during the course of this year.During the war,the last year for which the stock company yearbook can be used is1943.Changes during World War ‡U can be ascertained by comparing1943with1929.The year in which the Japanese economy began to grow rapidly was1955. Therefore,we can obtain information concerning the changes during the postwar reform and postwar revival period by comparing1955with 1943.The first oil crisis hit Japan in1973.The changes during the high growth rate period can be seen by comparing1973with1955.And finally,1984is the most recent year for which we have a stock company yearbook.The changes after the first oil crisis can be seen by compar ing1984with1973.

12 Table1 Japanese lndustrial Structure in1929and1942

(Thousands of Yen) 19291942

Rankinglndustriesp「 書言麗i呂1灘o「Industriesp「 諜1雛o「

1Rawsilk795 ,5991ronandsteel2,626,512 2Cottonyarn678 ,466Navyandarmyarsenals2,294,100 3Electricpower658 ,316Aircraft1,930,400 4Broadcottonfabrics526,096Guns ,bulletsandweapons1,915,242 5Nationalrailways517,795Nationalrailways1 ,441,9216J apanesesake302,120日ectricpower1 ,375,943 7Coalmining245 ,762Coalmining1,077,769 8Privaterailways232 ,254Shipbuilding858,377 9Militaryordnance208 ,5371ndustrialchemicals785」69 10Government-operatedsteelmills189 ,551Specialsteel753,170 11Printing186 ,304Electricalmachinery633,292 12VVbolfabrics176,896Medicine630 ,80013S teelproducts173,833Privaterailways560 ,33714S ugar158,125Lumber551 ,600 15Fiourmilling134 ,895Pigiron502,631 16Chemicalfertilizers132 ,711Rawsilk463,098 17Broadsilkfabrics129 ,516Metalmachinetools449,442 18Lumber112 ,170Coke421,210 19Non-ferrousmetalmining108 ,204Cottonyarn327 ,52020C oPPer108 ,166Tbols323β95

Sources: Shokosho(Ministry of Commerce and Industry),Kojyo Tokei Hyo(Census of Manufactures) ,1929and1942; Honpo Kogyo no S usei(Trend of Japanese Mining Industry),1929and1942;Ryoshin Minami,Tetsudo to Denryoku(Railway and Electric Power),T oyo Keizai Shinpo Sha1945;Miyohei Shinohara,Kokogyo(Mining and Manufacturing Industry)Toyo Keizai Shinpo Sha1972; United States Strategic Bombing Survey,Japanese War Production Industries

13 Table2 Ranking Table of Top50Enterprises in Japan by Net Profit

Ranking19291943 1SouthManchurianRailwayBankofJapan 2TbkyoElectricLightJapanElectricGenerationandTransmission 3MitsuiBussanMitsubishiHeavylndustries 40sakaGodoSpinningSouthManchurianRailway 5DaidoElectricPowerHitachiCo. 6YokohamaSpecieBankJapanlronandSteel 7TohoElectricPowerKantoDistrictElectricityDistribution 8ToyoSpinningMitsuiBussan 9KanegafuchiSpinningSumitomoMetallndustries lOHypothecBankofJapanManchurianHeavylndustries llYasudaBankKansaiDistrictElectricityDistribution 12TokyoGasCentralBankofManchuria 13KatakuraSilkManufacturingJapanNitrogenousFertilizer 14BankofJapanOliPaperCo. 1501iPaperCo.KanegafuchiSpinning 16DaiNipponSpinningMitsubishiMining 17DaiNipponBreweriesManchurianElectricWorks 18UjiRiverElectricityTokyoShibauraElectric 19NipponElectricPowerJapanMining 20DaiichiBankMitsuiMining 21MitsubishiBankJapanSteelPipe 22KeihanElectricRailwayOsakaMercantileSteamShip 23TbkyoMarineandFirelnsuranceKobeSteelWorks 24KyushuHydro-ElectricPowerToyoSpinning 25MitsubishiMiningMitsubishiBank 26FujiPaperManufacturingJapanMailSteamship 27NankaiRailwayMitsubishiShoji 28MitsuiMiningKoreanElectricEnterprise 29JapanMailSteamship .YasudaBank 30FormosaSugarManufacturingTokyoMarineandFireInsurance 31KyotoElectricLightHypothecBankofJapan

32ChiyodaLifelnsuranceTokyoElectricExpressRailway 33MitsuiBankShowaSteelManufacturingWorks

34SumitomoBanklndustrialBankofJaρan

35AsanoCementKyushuDistrictElectricityDistribution 36HanshinElectricRaiIwayKawasakiHeavylndustries 37SanlushiBankYokohamaSpecieBank 38HokkaidoCollieryandSteamshipHokkaidoCollieryandSteamship 39MeijiSugarManufacturingDaiNipponSpinning 40KyushuElectricRaiiwayNipponOil 41JapanNitrogenousFertilizerJapanSoda 42HiroshimaElectricityFurukawaElectriclndustry 43JapanWoolTextileDaiNipponSugarManufacturing 44DaiichiLifelnsuranceChubuDistrictElectricityDistribution 45NipponOilBankofFormosa

46DaiNipponSugarManufacturinglmperialBank

47SaghalienlndustriesHonkeikoCoalandlron 480sakaGasDaiNipponBreweries

49HokkaidoElectricLightSanwaBank 501ndustrialBankofJapanJapanExpress

Sources:Seishi Nakamura,•gHiyakusha Ranking no Hensen•h(Changes in ranking in the largest100companies in Japan),Chuokoron Keiei Mondai(Chuokoron Management Problems)special issue for autumn of1977;Kigyo Tokei Soran(Outline of Enterprise Statistics)Toyo Keizai Shinpo Sha1943;Jyojyo Kaisha Soran(Outline of Listed Companies)Tokyo Stock Exchange1955; Kaisha Nenkan(Year Book of Companies)Nihon Keizai Shimbun1974and 1985;Kaisha Sokan(Year Book of Non-Listed Companies)1974and1985.

14 195519731984

JapanDevelopmentBankBankofJapanBankofJapan BankofJapanJapanDevelopmentBankTbyotaMotorCo , JapanExpressTbyotaMotorCo,TokyoElectricPower ToyoRayonNissanMotorCo.HitachiCo , YahatalronandSteelMatsushita日ectriclndustrialCo.MatsushitaElectriclndustrialCo .F ujilronandSteelNipPonSteelSumitomoBank TokyoGasIBMJapanNissanMotorCo , TokyoElectricPowerHitachiCo。KansaiElectriCPower ToaNenryoKogyoSumitomoBankChubuElectricPower HitachiCo・ .NomuraSecuritiesCo、FujiBankJapanSte elPlpeTokyoElectricPowerTokyoShibauraElectric AsahiChemicallndustryFujiBankNomuraSecuritiesCo. K孕nsaiEkミctricPowerMit§ubishiBankFujitsu NlpponOllDalichiKangyoBankMitsubishiBank MatsushilaElectriclndustryChubuElectricPowerDaiichiKangyoBank KawasaklSteellndustrialBankofJapanJapanDevelopmentBank FujiBankSonyCorp,SanwaBank AjinomoloCo・TokaiBank旧MJapan Toyo串plnning 。MitsuiBankNECCorp,DalNlppon串ρinn lngTokyoShibauraElectricExport-1mportBankofJapan UウelndustrlesToyoRayonFujiPhotoFilmCo, NlhonCementTbyotaMotorSaleslndustrialBankofJapan OnodaCemgntKawasakiSteelNipponSteel ChubuElectrlcPowerLong-T6rmCreditBankofJapanToaNenryoKogyo MitsuiSteamshipSanwaBankTokaiBank MilsubishiOilDaiwaBankChugokuElectricPower TelkokuRayonT6ikokuRayonNipPondensoCo . TokyoSりi⇒auraElectricSumitomoMeta口ndustriesMitsubishiHeavylndustries JapanMlnlngAsahiChemicallndustryMitsuiBank AsahiGlassMitsubishi卜1eavyIndustriesSonyCorp. MitsubishiBankTokyoMarineandFirelnsuranceMitsubishiElectric ManufacturingCo. TohokuElectricPowerJapanSteelPipeDaiwaSecuritiesCo . MitsubishiHeavylndustriesKashimaConstructionKyushuElectricPower Reorganized TokaiBankKubotaIronandMachinerySharpCorp. Works SanwaBankTaiseiConstructionMatsushitaElectricWorks SumitomoBankNikkoSecuritiesCo.TohokuElectricPower MitsubishiMetalMiningTokyoBankNikkoSecuritiesCo , Kyushu日ectricPowerMatsushitaElectricWorks卜londaMotorCo . OjiPaperCo.MitsubishiSholiTbkyoGas J自panWoolTextileA串ahiGlassKyoseraCorp . M .ltsuiBank..Mlts"bishiTrustTokyoBankN l駆o$ecurltlesCo.SumltomoTrustTDKCorp. DallchlBankKomatsuManufacturingCo.MatsudaMotorCorp, HypothecBankofJapanKyowaBankOsakaGas TokyoMarineandFireHondaMotorCo.Long-1陀rmCreditBankofJapan lnsurance SumitomoMetallndustriesMitsubishiEilectricYamaichiSecuritiesCo, ManufacturingCo. ToyotaMotorCo.BridgestoneTireCo.SanyoElectricCo. HitachiShipbuildingDaiwaSecuritiesCo 。AsahiGlass andEngineering lndustrial旦ankofJapanC.1toh&Co.KirinBreweryCo . MaruzenOllCo,MitsuiTrustTokyoMarineandFireInsurance

15 T able3 Number of Enterprises by lndustry

19291943195519731984

Beer11--1

Sugar31-一 一

〇therfoods--1--

Cottonyarn432--

RawsiIk1-一 一 一Lightlndustries

WooIfabrics1-1--

Paper311--

Cement1-2--

Glass--111

Rubber-一 一1-

Film-一 一 一1

Chemicalfertilizers121--

Chemicalfibres--33- ,HeavyandO ll114-1 Chemical Machinery-2-2- ,I ndustrles Ships-2211

Electricalmachines-23713

Motorvehicles--135

ironandsteel-6541

Mining342-一}Mining

険ii糎i}-t"it鵬

Construction-一 一2-

Finance1311111814

Securities--134

Foreigntrade1213-

Shipping121--

Landtransport-11-一

Source:Table2

16 T able4 Number of Enterprises by Typel(1929～1984)

lPrewarandWartime口Postwar

19291943195519731984

Affiliatedwithgovernment514Affiliatedwithgovernment223

Banks46Affiliatedwithforeignenterprises-11

Affiliatedwithza/b∂ オsα1617Affiliatedwithbusinessgroup232319

Mitsui77Mitsui343

Mitsubishi56Mitsubishi676

Sumitomo21Sumitomo232

YasudallFuji453

Furukawa-1Sanwa523

AsanollDaiichi-Kangyo322

Affiliatedwithnewza/ba孟sθ 一8

Nissan-5

Nitchitsu-2

Nlsso-1

1ndependent29141ndependent252427

Note:1)In1943,three Manchurian companies are countedtwice because they are affiliatedboth withthe government and withthe Nissan . 2)For the postwarperiod,enterprises affiliated with two businessgroups,such as Hitachiand Nippon Express,areregarded as ndependent. i Source:Table2

17 ‡U.The Industrial Structure and Composition of Large Enterprises in1929

1.Industrial Structure According to Table1,which shows the production value or sales revenue of the20largest industries in1929,it is clear that the10largest comprised silk reeling,cotton spinning,electric power,cotton weav ing,national and private railroads,sake brewing,coal mining,military ordnance and government-operated steel milling.Electric power and railroads are likely to occupy an important place in the industrial struc ture of almost all industrialized countries.A special characteristic of the Japanese case,therefore,lies in the fact that the textile industries, for example silk reeling,cotton spinning and weaving,as well as coal mining,occupied a dominant place,while government-operated engineering works(military ordnance)and a government steel mill

(Yahata Iron Manufacturing Works)appeared in the top10,replacing private heavy and chemical industries. Furthermore,raw silk and cot ton fabrics were two of the major Japanese exports at that time,while cotton yarns,silk fabrics,copper and coal had also been major export items before World War‡T.The textile industry,mainly silk and cotton, and the mining industry,mainly coal and copper,were the driving forces of Japan's industrialization.

2.The Composition of Large Enterprises by Industry Table2is the ranking table of the top50Japanese enterprises in terms of net profit.Table3and Table4are made by arranging the con tents of Table2according to industry and type of enterprise.From Table3it becomes clear that the composition of large enterprises in 1929corresponded fairly closely to the above-mentioned characteris tics of the industrial structure.The number of enterprises in public utilities was16,while those in the mining and textile industries amounted to three and six,respectively.In addition,there were three each in sugar refining and paper manufacturing,and one each in beer brewing and cement manufacturing.Apart from sugar manufacturing, other industries do not appear in Table1,as they follow the top20 industries shown in that table. Aside from firms in manufacturing production,there were13finan cial institutions,while foreign trade and marine transportation had one each.Table1does not give us any information about the situation of the non-production sector in the industrial structure.Data on the amount of authorized capital by industry in1929shows that banking

18 was the largest,marine transportation ranked sixth above cotton spin ning,and foreign trade ranked ninth,following spinning.1We can safely say that banking,marine transportation and foreign trade were also major industries of prewar Japan,assisting the rapid industrializa tion led by the textile and mining industries.The importance of these sectors is reflected in Table2.

However,the preeminent position of banking is apparent from Table2.A tentative explanation for this follows these lines:First ,the government made positive efforts to introduce a financial system to Japan that was similar to those of the advanced countries of the West , and a substantial amount of•esubsidies'were given to banking .2These moves increased the sector's importance in the economy during the early industrialization period.Second,for the same reason,as will be shown later,the government also established special,semi

governmental banks that occupied a dominant position in the banking system.Third,simultaneously,large banks that belonged to zaibatsu or engaged in regular transactions with major industries held similarly dominant positions. Data on the amount or deposits held by the largest20ordinary banks in1910makes it clear that ,Dai-Ichi(first),Sumitomo, Yasuda, and Dai-San(third)were the six largest banks .3Of these,Mitsui,Mitsubishi and Sumitomo belonged to zaibatsu and had close connections with industrial enterprises in the same group ,each of which occupied advantageous positions in their respective areas .Dai- Ichi and Yasuda were not part of a general zaibatsu,but Dai-Ichi had close connections with the Furukawa and Okura zaibatsu and Yasuda with the Asano zaibatsu.Dai-San Bank was a subsidiary of Yasuda Bank.Of the lesser ranking banks,Konoike ,Sanjushi(34th)and Yamaguchi amalgamated to become the Sanwa Bank ,one of the six largest postwar banks.All were situated in the Kansai area ,and per formed transactions mainly with important enterprises in that area that included cotton spinning,foreign trading and shipping companies .

3.Composition of Large Enterprises by Type of Enterprise If the large enterprises in Table2are classified by the basis of stock ownership or real management power,they can be put into three groups.The first comprises special companies,including banks estab lished under special laws,partially owned and controlled by the gov ernment.The second category includes enterprises belonging to zaibatsu and the third,other independent enterprises.

19 (1)Special Companies and Special Banks Of enterprises listed in Table2for1929,those belonging to the first category are the South Manchurian Railway Company(1st) ,the Yokohama Specie Bank(6th),the Hypothec Bank of Japan(10th) ,the Bank of Japan(14th)and the Industrial Bank of Japan(50th). The Bank of Japan was the country's central bank,and it is normal for a central bank to have a close relationship with the government . What distinguishes the Japanese case is the fact that a railway company in a quasi-colony and special banks should occupy such high positions in enterprise ranking.The South Manchurian Railway was established in1906to manage•gthe railway south of Changchun ,the land attached to it and coal mines,etc.,•hwhich Japan had acquired from Imperial

Russia as a result of its victory in the Russo-Japanese War .The com pany had a capital of200million yen;the government owned half the stock.Moreover,the government guaranteed the payment of principal and interest on debentures and the payment of dividends up to six per cent on privately-owned stocks.In return for such assistance ,the gov ernment had the right to appoint directors and intervene extensively in management matters.

The Yokohama Specie Bank was established in1880 .Unlike other special banks,the major role in its establishment was taken not by the government,but by foreign trade merchants in Yokohama and indi viduals connected with Keio Gijuku(forerunner of the present Keio University).At that time,the volume of government note issues was growing and inflation was rampant.The goal of the YSB was•gto oper ate on the basis of specie,to absorb specie concealed by private people and increase its supply.•hThe government welcomed the aims of the YSB and granted the bank silver currency worth one million yen ,one third of its capital stock.However,it was not easy for the bank to oper ate according to its original intentions when inflation was so high .The bank became a foreign exchange bank in1881,and the government promulgated the Yokohama Specie Bank Regulations in1887.Under these regulations the bank became a special bank specializing in the foreign exchange business.In1889,the YSB reached an agreement with the Bank of Japan regarding the rediscounting of foreign exchange bills.The agreement contracted the Bank of Japan to redis count foreign exchange bills submitted by the YSB at a rate of two per cent per annum,up to a limit of about10million yen a year .In return, the appointment of the president and directors of the bank required the permission of the Minister of Finance,who appointed a supervisor to oversee important management matters.

20 The Hypothec Bank of Japan was established in1897to lend money for the improvement and development of agriculture and industry. With an authorized capital of10million yen,its main functions were to make loans on the security of real estate in installments over a period of five or10years,to make unsecured advances to local governments and to underwrite debentures issued by the Agricultural and Industrial Bank in each prefecture.This bank was given special rights allowing it to issue premium bearing debentures up to a limit of10times its authorized capital.In return for this privilege,the president and the vice-president of the bank were appointed by the government,the Minister of Finance was briefed on the bank's business and a super visor appointed by the Minister oversaw its daily transactions. The Industrial Bank was established in1900to make long-term loans to industry secured by valuable securities,to promote the import of foreign capital and to advance the trust business.Its authorized cap ital was10million yen,and it was authorized to issue debentures up to a limit of five times its authorized capital.The manner in which the government supervised and watched over this bank's affairs was the same as in the case of the Hypothec Bank of Japan.4 In1929,the ratio of stocks owned by the government to total stock for these companies was50percent for the South Manchurian Railway Company,47percent for the Bank of Japan,22.6percent for the YSB, 3.6percent for the Hypothec Bank of Japan and2.3percent for the Industrial Bank of Japan.5 These special companies,including banks,constituted three of the top10enterprises and four of the top14enterprises.This shows their important position in the composition of enterprises of prewar Japan. What is the significance of the fact that they realized high profits,while being subsidized by the government? These enterprises were characterized by being permitted to pursue profits as well as act as agents of specific government policies.For example,the purpose of the YSB was to assist Japanese foreign trading companies and to cooperate with the government and the Bank of Japan in the field of foreign exchange operations.However,in order to fulfill this duty successfully,the YSB had to attract competent per sonnel.To do so,it had to have sufficient funds to pay higher wages than did other banks.This need was greater in Japan than in other advanced countries,because Japan's economy had grown so rapidly that the number of those well-trained in the modern foreign exchange banking business was very limited.The YSB was successful in earning large profits and attracting competent personnel,which enabled the

21 bank to succeed in its business operations.Moreover,its success stimu lated other banks to begin foreign exchange transactions;the accumu lation of know-how and talented personnel in the bank assisted other banks both directly and indirectly.The same mechanism operated in the case of other special companies and banks.

(2)Zaibatsu Enterprises The number of enterprises in the second category totalled16 , roughly one third of the top50enterprises in1929.As shown in Table 4,of these,seven belonged to Mitsui,five belonged to Mitsubishi ,two b elonged to Sumitomo,and one each to Yasuda and Asano .The enterprises belonging to each zaibatsu were as follows: Mitsui•\Mitsui Bussan(foreign trading),Kanegafuchi Spinning ,OjiP aper Co.,Mitsui Mining(coal and zinc),Formosa Sugar Man ufacturing,Mitsui Bank,Hokkaido Colliery and Steamship(coal) Mitsubishi•\Mitsubishi Bank,Tokyo Marine and Fire Insurance,Mitsubishi Mining(coal and copper) , Japan Mail Steamship(marine transportation), Meiji Sugar Manufacturing Sumitomo•\Sumitomo Bank,Hanshin Electric Railway Yasuda•\Yasuda Bank Asano•\Asano Cement

There were seven well-known zaibatsu at that time .These were Mitsui,Mitsubishi,Sumitomo,Yasuda,Furukawa ,Asano and Okura.I n this paper,zaibatsu is defined as a business group controlled by a specific family,diversified into a number of industries and controlling oligopolistic enterprises.Zaibatsu are generally classified by main field of activity into three categories .The first is that of general zaibatsu,which includes Mitsui,Mitsubishi and Sumitomo .The activ ity of these three zaibatsu extended not only to industry but also to financing.Yasuda belongs to the second category ,financial zaibatsu,i n which,comparatively speaking ,activity was mainly confined to financial matters.Third came the industrial zaibatsu ,Furukawa,A sano and Okura,which were mainly involved in the industrial field . The largest zaibatsu in prewar Japan was Mitsui .Table5shows an outline of its structure at the end of1928 .Mitsui Gomei was the head quarters(holding company)of Mitsui and was wholly owned by the House of Mitsui,which consisted of11families .The main enterprises belonging to the Mitsui zaibatsu were divided into two groups accord ing to their relationship with headquarters .First rank subsidiaries

22 Table5Structure of Mitsui Zaibatsu in1928 (Thousands of Yen;%)

Ratio of Paid-up stockholding Capital by Mitsui line enterprises

100,000 100.0 Mitsui Bussan Mitsui Life Insurance 500 50.0 60,000 67.5 First-rank Subsidiary Mitsui Bank 7,500 47.5 Companies Mitsui Trust Bank Mitsui Mining 62,500 100.0 100.0 Toshin Warehousing 11,500 Sub-Total 242,000 90.2 24.0 Mitsui Gomei Oji Paper Manufacturing 48,683 43,674 19.7 (Headquarters) Hokkaido Colliery and Steamship Kanegafuchi Cotton Spinning 28,596 5.4 Shibaura Electric Machine Manufacturing 20,000 56.3 Taiwan Sugar Refining 38,100 6.1 Second-rank Subsidiary Gunze Silk Reeling 11,717 3.9 Companies Electrical Chemical 17,500 6.9 Onoda Cement Manufacturing 18,600 9.9 Mitsukoshi Department Store 11,000 Tropical Industries 5,525 39」 Taiwan Colonization and Tea Manufacturing Dai Nippon Celluloid Manufacturing 10,000 27.9 Sub-Total 253,395 17.3

Source:Kamekichi Takahashi,Nihon Zaibatsu no Kaibo(Analysis of Japanese Zabatsu),Chuokoron Sha 1930,pp.50,65,66,71.

23 were almost wholly owned by Mitsui families or headquarters .The ratio of stock owned by Mitsui families and the holding company to total stock amounted to90.2percent for first rank subsidiaries as a whole.In the case of second rank subsidiaries,that ratio declined to 17.3percent.6For the latter,stocks were issued to the public ,and even Mitsui could not completely control their management .Of the enter prises listed in Table2,Mitsui Bussan,Mitsui Bank and Mitsui Mining were first rank subsidiaries,while Oji Paper Co.,Hokkaido Colliery and Steamship,Kanegafuchi Spinning and Formosa Sugar Manufac turing were second rank subsidiaries. Table6shows the proportion of stock owned by the family and headquarters and that owned by all members of the group in relation to total stock for first rank subsidiaries in the seven largest zaibatsu .It is clear that the latter ratio amounted to up to80percent or more in the case of Mitsui,Mitsubishi,Sumitomo ,Furukawa and Okura.In the same table,the Yasuda,Mitsui Bank ,Mitsui Life Insurance and Mitsui Trust Bank ratios shown in Table5suggest that generally speaking financial institutions had offered stocks for public subscrip tion by the end of the1920s to emphasize their character as public banks.As a result,the ratio of stock owned by members of the same group to total stocks was lower than in other cases.If we exclude the figures for financial institutions from Table6 ,the ratio is much higher. One more point is evident from Table5.In the case of Asano ,the proportion of total stock owned by the family and headquarters was much lower than that in the other zaibatsu ,with the exception of Yasuda.Asano aggressively diversified into promising industrial fields even though its capital resources were limited in comparison to those of the other zaibatsu.Thus,the Asano ratio became lower than that in the others.We can safely say that in general the first rank zaibatsu sub sidiaries were almost wholly owned by the family or the holding com pany,with the exception of financial institutions and enterprises belonging to Asano. If we subdivide the enterprises listed in Table2belonging to zai batsu other than Mitsui we get the following: Mitsubishi•\First rank subsidiaries:Mitsubishi Bank , Mitsubishi Mining Second rank subsidiaries:Tokyo Marine and Fire

Insurance,Japan Mail Steamship ,Meiji Sugar Manufacturing Sumitomo•\First rank subsidiary:Sumitomo Bank

Second rank subsidiary:Hanshin Electric Railway

24 Table6Number of First-Rank Subsidiaries and Stockholding Ratios(1928)

Note:Stockholding ratio of the zaibatsu as a whole for Asano is not clear. Source:Kamekichi Takahashi,op.cit.,pp.65,122-123,172-173,206,257,274-275,308.

Yasuda•\First rank subsidiary:Yasuda Bank Asano•\First rank subsidiary:Asano Cement In sum,of the top50enterprises,16belonged to zaibatsu,but of these only Mitsui Bussan,Mitsui Mining and Mitsubishi Mining were almost wholly owned by both the family and holding company.Banks belonging to Mitsui,Mitsubishi,Sumitomo,Yasuda and Asano Cement had already offered their stock for public subscription by the end of the1920s,although they were first rank subsidiaries in their respective zaibatsu.In the case of second rank subsidiaries,the zaibatsu owned only a part of the stock.Therefore,the extent of zaibatsu control over management was less than that in first rank sub sidiaries,varying with the occasion.

(3)Independent Enterprises The number of enterprises in the third category totalled29,about60 percent of the top enterprises in1929.They were distributed by indus try in the following way:electric power,nine;railways and cotton spin ning,three each;gas,banking,paper manufacturing and life insur ance,two each;silk reeling,beer brewing,fertilizer manufacturing, wool weaving,oil refining and sugar manufacturing,one each. Public utilities,such as electric power,gas and railroads,as well as cotton spinning,occupied a dominant position among independent enterprises.Of the seven private enterprises in the top10,electric power and cotton spinning accounted for three enterprises each.These enterprises started as joint stock companies whose stocks were widely distributed among many holders.Therefore,zaibatsu wanting to con-

25

Number of first-rank subsidiariesStockholding ratioheld by Family and Headquartersheld by all members of same zaibatsuMitsui Mitsubishi Sumitomo Yasuda Furukawa Asano Okura6101312462090.2%69.479.131.772.850.884.790.6%77.680.548.189.492.7 trol enterprises through total ownership did not enter these industries on a large scale.Of course,the Kanegafuchi Spinning Company was a second rank subsidiary of Mitsui,the top stockholder of this company, but even here the proportion of total stock owned by Mitsui's head quarters amounted to only5.4percent.7The real management influ ence was wielded by Sanji Muto,who had entered the company as a professional manager and subsequently became president.Generally speaking,in the electric power and cotton spinning industries,the authority to manage was the responsibility of professional managers. This was because the concentration of stockholding in the hands of a single large stockholder was low and stocks were widely distributed among many holders. Among industries other than electric power and cotton spinning ,a competent professional manager could be promoted to president and at the same time become a large stockholder.Kyohei Makoshi of Dai Nippon Breweries,Heizaburo Okawa of Fuji Paper Manufacturing- and Saghalien Industry(paper manufacturing)and Raita Fujiyama of Dai-Nippon Sugar Manufacturing are examples.In these cases, sub stantial remuneration enabled a professional manager who initially owned no stocks in the company,or only a few,to become a large stockholder and control and own the company.In contrast, Kentaro Katakura in Katakura Silk Manufacturing and Shitagau Noguchi in Japan Nitrogenous Fertilizer held the majority of stock because they founded their companies.8

III.Changes in Industrial Structure and the Composition of Large Enterprises from1929to1943

1.Changes in Industrial Structure The period from1929to1943includes the Showa Depression(1930- 31),the Manchurian Incident(1931-6) and the war period(1937-45) . The Japanese economy was greatly shaken by the Showa Depression , but it revived rapidly after1931because of three factors.First ,the value of the yen depreciated sharply after Japan abandoned the gold standard at the end of1931.This factor promoted the export of textiles and prevented the import of heavy and chemical industrial products, which encouraged the growth of Japan's own heavy and chemical industries.Second,the Manchurian Incident,which occurred in Sep- tember1931,increased the demand for munitions and further pro moted the growth of heavy and chemical industries.Third ,Korekiyo Takahashi,who became Minister of Finance at the end of1931,carried

26 out a kind of Keynesian policy.He issued deficit covering bonds underwritten by the Bank of Japan that were then sold to city banks. The government spent the money procured by this operation mainly on the munition industries and public works,which increased demand in the heavy and chemical industries. After1937,when the second Sino-Japanese War broke out,the Japanese economy moved toward full-scale mobilization for war.Pro duction in the munitions industries increased drastically,while those in non-munitions industries,especially textile industries,decreased.Of course,the Pacific War promoted this trend even more vigorously after1941.As shown in Table1,the heavy and chemical industries in the private sector were still underdeveloped even at the end of the 1920s.Therefore, Japan had to rapidly create them on a large scale as a foundation for munitions industries and concentrated a large part of the country's management resources into those industries.According to Table1,which shows changes in the industrial structure between 1929and1943,it is clear that the private heavy and chemical industries expanded rapidly and by contrast the position of the textile industries fell drastically.In1929,there were no private heavy and chemical industries among the top10industries;instead,branches of the textile industry ranked first,second and fourth.The situation changed dramatically after1931.In1942,the last wartime date for which the Census of Manufactures can be utilized,the textile industries had dis appeared from the top10industries.In contrast,six private heavy and chemical industries and one government-operated,military ordnance, were situated among the top10. Airplanes,warships,guns,bullets and weapons,in addition to iron and steel and their raw material, occupied top positions,while silk reeling fell from the top to sixteenth position and cotton spinning from second to nineteenth.

2.Changes in the Composition of Large Enterprises by Industry Changes in the industrial structure were also reflected in changes in the composition,by industry,of large enterprises.From Table3,it is clear that the number of ranked enterprises in the heavy and chemical industries increased from only two to15,while the number of enter prises in light industry decreased from14to six between1929to1943. The increase in machinery,ships,and electric machinery,from zero to two,and iron and steel from zero to six.The number of ranked enter prises in textiles fell from six to three.That the light industries still accounted even for six of the top50enterprises in1943is largely due

27 to the fact that they controlled large capital resources and had many competent engineers and other personnel.Therefore,these industries could make a large profit by diversifying into newly developing indus tries,especially into the munitions industries,even though their origi nal fields of operation were curtailed drastically.

3.Changes in the Composition of Large Enterprises by Type of Enterprise (1)Special Companies As shown in Table4,the number of special companies and banks established under special laws increased substantially from five in1929 to14by1943.The new enterprises among the top50in1943were Japan Electric Generation and Transmission,Japan Iron and Steel, Manchurian Heavy Industries, Central Bank of Manchuria,Manchu ian Electric Industries,Showa Steel Manufacturingr Works,Bank of Formosa,Honkeiko Coal and Iron,and Nippon Express.Of these, Japan Electric Generation and Transmission,Japan Iron and Steel, and Nippon Express were established as special companies that brought together many existing companies.The newly merged com pany then occupied a dominant position in this industry under special laws.The relevant laws were the Electric Power Control Law,the Japan Electric Generation and Transmission Company Law,the Japan Iron and Steel Company Law and the Nippon Express Company Law. Electric power companies in Japan were forced to hand over their main hydroelectric stations and transmission equipment to the Japan Electric Generation and Transmission Company(Nippatsu),which was newly established in1938.The management of this company was wholly controlled by the government.The cost of electric power that the company bought from or sold to other electric companies was also controlled by the government.Moreover,all members of its executive committee were appointed by the government and a supervisor appointed by the government took charge of its daily business. In return,the company was given the following privileges:(1)the government guaranteed stockholders dividend payments of up to four percent by subsidizing the company(this level was raised to six percent in1941);(2)the government also guaranteed holders the payment of principal and interest on debentures and allowed the company to issue debentures up to three times its paid-up capital. This limit was higher than that permitted by commercial law In addition,remaining electric power. companies were compelled to

28 assign all their electric power generating and transmitting equipment to Nippatsu and to assign all electric power distribution equipment to nine new electricity distribution companies established in1942.As a result of this policy,electricity generation and transmission was com pletely monopolized by Nippatsu and electricity distribution was spread over nine districts,business in each district being monopolized by a single distribution company.The Kanto, Kansai and Chubu elec tricity distribution companies in Table2are enterprises of this kind.9 The Japan Iron Manufacturing Company was established by merg ing the government's own iron manufacturing works with five private iron and steel manufacturing companies in1933.The government owned half of the new company's stock and allowed the company to deduct losses from dividends payable to the government when these losses were incurred by government orders.The government super vised the company,and the company had to ask government permis sion with respect to many important management matters.10The com pany's market share amounted to95.7percent of pig-iron production and42.8percent of steel production. The Nippon Express Company was established as the result of the merger in1938of seven accounting agents dealing in credit and debt settlement among small scale transportation agents.The company began to enter direct transport services in1941and in1945accounted for72.6percent of all freight dealt with at railway stations.The govern ment owned half of this company's stocks and allowed it to postpone dividend payment to the government when the dividend ratio payable to private companies and individuals was under six percent.For this assistance,the government retained the right to issue directives to the company,although it could not appoint members of the executive board.11 Of the nine companies that first appeared in the ranking table in 1943,five of the remaining six were established in Manchuria .The Manchurian Heavy Industries Corporation,the Central Bank of Man churia,the Manchurian Electric Industries Company and the Showa Steel Manufacturing Works were'special companies'governed by spe cial laws,while the Honkeiko Coal and Iron Company was designated a'quasi-special company'in1935.It later became a subsidiary of the Manchurian Heavy Industries Corporation in1937 . In1931,when was founded,the Central Bank of Man churia was established to discharge central bank functions in the terri tory.In the development of industry,Manchukuo adopted the policy of entrusting the management of industries for national defense or the

29 public interest to a'special'company or a small number of'quasi-spe- cial'companies.A'special'company was a company established in an important industry under a law with a specific economic policy objec tive.A'quasi-special'company was defined as a company that came under any of the following headings:12(1)a company in which the gov ernment invested capital;(2)a company whose establishment was allowed under specific conditions by the government and(3)a com pany whose articles of incorporation provided for the government's right to intervene in its management. The Manchurian Electric Industries Company was established in 1934as a result of the merger of all existing electric power companies in Manchuria and was initially a'quasi-special'company.In1940,it became a'special'company under the Manchurian Electric Industries Company Law.The Showa Steel Manufacturing Works was estab lished by the South Manchurian Railways Company as a wholly owned subsidiary in1929and remained a'quasi-special company'after the founding of Manchukuo.In1937,the Manchurian Heavy Industries Development Corporation was established.It became a subsidiary of Showa Steel Manufacturing Works and was reorganized as a•especial company under the Showa Steel Manufacturing Works Law •f of1939. The Honkeiko Coal and Iron Company was originally established and managed as a joint Chinese-Okura zaibatsu venture.It was reor

ganized as a•equasi-special•fcompany in1935when the Manchukuo government collaborated with Okura to invest capital in it.Four years later it also became a subsidiary of the Manchurian Heavy Industries Development Corporation.In1944,under the terms of the Manchu rian Iron Manufacturing Company Law,these two iron and steel man ufacturing companies merged to become the Manchurian Iron Man ufacturing Company,another•especial•fcompany.13 The Kwantung Army,which controlled Manchukuo,was strongly anti-zaibatsu.This led to the Manchukuo government's adoption of the above-mentioned•especial company•fsystem as an economic development policy.However,this system did not work very well,and it became difficult for the government to raise the necessary funds for the economic development of Manchuria.In1937,the government approached Yoshisuke Ayukawa,president of the newly developing Nissan zaibatsu.The Kwantung Army's anti-zaibatsu sentiment was directed towards the old zaibatsu,such as Mitsui and Mitsubishi,but not towards new zaibatsu such as Nissan.As will be shown later,Nis san raised its management funds from the public and Ayukawa also proposed the development of Manchuria through the import of foreign

30 capital.The Kwantung Army welcomed the pattern of action taken by the Nissan zaibatsu and Ayukawa's suggestion.Responding with this approach,Ayukawa established the Manchurian Heavy Industries Development Corporation in1937under the Manchurian Heavy Industries Development Corporation Control Act.The Showa Steel Manufacturing Works became a subsidiary of this company in1937, and the Honkeiko Coal and Iron Company also became a subsidiary in 1939. The Manchurian Heavy Industries Development Corporation was given certain management privileges by the government.Namely,the company would only pay half the dividends on stocks owned by the government as compared to the dividend rate payable on stocks owned by private companies and individuals,as long as that dividend rate remained below7.5percent,the government would compensate the company for lack of profit for ten years,providing the profit earned by the business in Manchuria was less than six percent of total funds invested,and the company was allowed to issue debentures up to the limit of its paid-up capital and the government would guarantee the payment of both principal and interest. In return,the government exercised considerable supervision over the company.The company had to submit its business plan to the Minister of Finance for approval every year.The appointment and dis missal of directors and inspectors;changes in articles of incorporation; the disposal of profits;the issuing of debentures,dissolution and merger;and the transference of important assets or their granting as security also required its permission.Furthermore,the government had the right to order the company to cancel decisions whenever the government deemed this necessary,to dismiss directors and to appoint a supervisor.The supervisor had the right to inspect account books and company documents,to order the company to produce necessary documents and to speak at the general meeting of stockholders.Such privileges on the part of the company,as well as the government's right to supervise,were more or less common to all the Manchurian com panies mentioned above. The plan to import foreign capital into Manchuria was never realized.In1941,the Manchurian Investment Securities Company was established to market Japanese companies'stocks owned by the Man churian Heavy Industries Development Corporation and to raise the necessary funds for the economic development of Manchuria.The stocks of the Manchurian Investment Securities Company were divided into two types:voting stocks(5,000)and non-voting stocks

31 (95,000).Subscriptions for the former came from the Nissan Company and those for the latter from18life insurance companies in Japan.In 1942,when Yoshisuke Ayukawa resigned as president of the Manchu rian Heavy Industries Development Corporation,the Gisaikai Found ation,which Ayukawa established to conduct research on public finance,economic matters,etc.in the Great East Asia Co-Prosperity Sphere,received voting stocks in the Manchurian Investment Sec urities Company from Nissan.14

(2)Enterprises Belonging to Zaibatsu According to Table4,the number of zaibatsu enterprises did not change,and continued to account for about30percent of the top50 enterprises between1929and1943.However,the relationship between these enterprises and the stock market did change.As men tioned earlier,first rank zaibatsu subsidiaries tended to be almost wholly owned by the zaibatsu family and headquarters.However,with the development of the heavy and chemical industries after1930,the zaibatsu aggressively sought to enter them.To raise the necessary funds,the zaibatsu headquarters had to offer the stocks of first rank subsidiaries for public subscription.Moreover,the zaibatsu had to raise funds for welfare work and cooperate with state policy in an attempt to appease the anti-zaibatsu feelings of the army. As a result,the number of stockholders of first rank subsidiaries increased rapidly in the following way:Mitsui Bussan,from31to 15,155;Mitsui Mining,from26to6,912;Mitsubishi Shipbuilding (Mitsubishi Heavy Industries),from23to29,895;Mitsubishi Shoji, from20to5,940;and Sumitomo Steel Manufacturing(Sumitomo Metal Industries),from14to7,557.At the same time,the ratio of stoc kholding by enterprises within the same group declined from nearly 100percent to75.8percent for Mitsui Bussan,84.8percent for Mitsui Mining,40.9percent for Mitsubishi Shipbuilding,47.2percent for Mitsubishi Shoji and41.4percent for Sumitomo Steel Manufacturing . Mergers with enterprises outside the zaibatsu also increased the number of stockholders and decreased the proportion of stock held by enterprises in the same group.For example,the number of stockhold ers in Oji Paper Co.rose from6,000to23,516,and in Shibaura Man ufacturing(Tokyo Shibaura Electric)from211to5,885.The propor tion of Oji Paper Co.stock held by enterprises in the same group fell from25.2percent to3.5percent,and in Shibaura Manufacturing stock from58.4percent to15.1percent. Largely as a result of these factors,the average number of stock- 32 holders and the average ratio of stockholding by enterprises in the same group changed as follows:

Average number of stockholder:Mitsui,from5,481to14 ,836; Mitsubishi,from6,374to11,106;Sumitomo,from3,128to5,862; Yasuda,from14,063to12,314;Furukawa,from323to19,821;and Asano,from9,370to23,679. Average ratio of stockholding by enterprises in the same group: Mitsui,from51.0percent to31.7percent;Mitsubishi,from52.5per cent to35.2percent;Sumitomo,from52.9percent to32.8percent; Yasuda,from46.4percent to58.3percent;Furukawa,from65.2per cent to44.5percent;and Asano,from19.8percent to21.5percent.15 Only in Yasuda did the number of stockholders decrease slightly.In both Yasuda Bank and Asano Cement,the ratio of stockholding by enterprises in the same group also decreased.With these exceptions, in most of the top50enterprises the number of stockholders increased, and the in-group stockholding ratio decreased. This trend was most apparent in the first rank zaibatsu subsidiaries. Zaibatsu control of first rank subsidiaries through total ownership of stock collapsed during this period,and zaibatsu began to aggressively utilize the functions of joint stock companies as a means of absorbing capital funds from the public.

(3)Enterprises Belonging to the New Zaibatsu As shown in Table4,the number of enterprises belonging to new zaibatsu increased rapidly from zero to eight overall.The growth of Nissan was especially remarkable.In general,•enew zaibatsu'refers to those business groups based mainly in the heavy and chemical indus tries,that developed rapidly during the1930s.Japan Industries(Nis san),Japan Nitrogenous Fertilizer(Nitchitsu),Nippon Soda(Nisso), Mori Industrial Enterprise(Mori)and the Physical and Chemical Research Institute(Riken)are examples.

The new zaibatsu had certain special characteristics.First ,each new zaibatsu was led by a person of marked individuality,for example Yoshisuke Ayukawa(Nissan),Shitagau Noguchi(Nitchitsu) , Tomonori Nakano(Nisso),Nobuteru Mori(Mori)and Masatoshi Okochi(Riken).Most were engineers or chemists who had graduated from the imperial universities at Tokyo or Kyoto .Only Mori was not a university graduate.They brought to the developing heavy and chemical industries a vigorous pioneer spirit. Second,in contrast to the old zaibatsu,which were mainly founded on mining,banking and foreign trade,the main industrial base for the

33 new zaibatsu was the heavy and chemical industries.Nitchitsu,Nisso and Mori were mainly built on the chemical industries,while Riken was based on the machine industries.Nissan diversified far more widely than the others,but among the industries it controlled,the importance of the machine industries was greater than that of the metal and chemical industries.None of the new zaibatsu diversified into banking and foreign trade. Third,the new zaibatsu headquarters were genuine holding com panies,or holding companies that ran a production business as well, and these holding companies were public companies with a large number of stockholders.The founders of the new zaibatsu initially gathered the necessary funds for establishing new companies from their relatives and friends,but the scale of capital funds required for establishing and running an enterprise in the heavy and chemical industries was comparatively larger than in other industries.The speed of development of enterprises,moreover,became faster due to the rapid development of the heavy and chemical industries demanded by the government during the quasi-war and wartime periods.Therefore, new zaibatsu had to aggressively mobilize capital funds from the public almost from the start.Japan Industries already had19,154stockhold ers in1929and Ayukawa,president of the company,owned19.2per cent of total stock with his relatives.The Hitachi Co.and Japan Mining were the two main subsidiaries of Nissan and were almost wholly owned by it,the proportions of Nissan-held stock being96 .5percent and100percent respectively. The large stockholders after Ayukawa were Dai-Nippon Securities with four percent of stock and Osakaya Store,which dealt in securities, with1.2percent of stock.Thus,the gap in stockholding between Ayukawa and his relatives and the second and third largest holders outside the family was great.We can therefore safely say that Ayukawa in turn owned a controlling share at headquarters,which in turn owned almost all the stock of the main subsidiary companies , while headquarters also offered its stocks widely for public subscrip tion. In the case of Japan Nitrogenous Fertilizer the number of stockhol ders amounted to1,863and Noguchi,president of the company,with his friends held20.9percent of total stock in1929.Korean Hydroelec tric,the company's subsidiary in Korea,was wholly owned by head quarters.The largest stockholders next to Noguchi were Shigeya Kondo with4.4percent,the Aichi Bank with4.1percent,Hisaya Iwasaki with3.3percent and the Moroto Company,also with3.3per-

34 cent.In this case,too,the gap in stockholding between the next largest outside stockholder and Noguchi and his friends was considerable and Noguchi owned a controlling share at headquarters. In the case of Nihon Soda,there were782stockholders and Nakano,the managing director of the company,held7.7percent of total stock in1929.The composition of the directors and large stock holders of this company was as follows:

As shown in this table,the company was a partnership of a few people with interests in Nakano's soda manufacturing technology. Nakano became managing director of the company both as a technological leader and as the largest stockholder. Nissan,Nitchitsu and Nisso aggressively diversified into many fields,establishing business groups that controlled many companies after1930.The number of stockholders in the new zaibatsu headquar ters increased rapidly from1927to1937.Nissan grew from18,154to 57,424,Nitchitsu from1,863to13,362and Nisso from782to14,558.In this process,Noguchi increased his stockholding from20.9percent to 25.1percent,and Nakano became president of his company and rapidly increased his holdings from7.7percent to18.9percent during the same period.In1937,Nakano's stockholding far exceeded that of First Conscription Insurance,the next largest stockholder with only 1.5percent of total stock.Through this process,Noguchi and Nakano could strengthen or establish control of headquarters. By contrast,Ayukawa's stockholdings decreased substantially from 18.2percent in1929to4.5percent in1937.The composition of the10 largest stockholders of Nissan headquarters in1937was as follows:

Nissan quickly expanded by mobilizing capital from a large number of mass stockholders so that Ayukawa's stockholding ratio decreased rapidly.However,as shown in the above table,most of the large stock holders in Nissan consisted of insurance companies and security com panies that stood in a relatively neutral position to Ayukawa,the con trolling power at headquarters,even though his stockholding ratio was low.16 Nevertheless,Noguchi and Nakano's stockholdings ratio decreased substantially from1937to1943.Noguchi's holding at Nitchitsu decreased from25.1percent to9.9percent,and Nakano's holding in Nisso decreased from18.9percent to4.8percent.Moreover,Nisso's ratio of profit to paid-up capital,which had reached over30percent

35 after the latter half of1933,declined to under30percent in the second half of1935and less than20percent after the first half of1939.This was because its main business,soda manufacturing,was not a war industry. On the other hand,Nisso also had heavy liabilities with outside sources.The ratio of debentures and bank-debt to total capital amounted to57.5percent at the end of1937.The Industrial Bank of Japan,its main bank,assigned three people to Nisso's executive board in1937,and Nakano had to resign the presidency in1940.17 Nitchitsu's dependence on outside liabilities also increased from 1937to1943.The ratio of total debentures,notes payable and bank- debts to total capital amounted to57.5percent at the end of1937.The Industrial Bank of Japan was almost a monopolistic supplier of funds to this company.Nitchitsu was not controlled by the Industrial Bank, but Noguchi's actions were certainly restricted to some extent by it. Also in the case of Nissan(Manchurian Heavy Industries Develop ment Corporation),the dependence on outside liabilities increased from26.3percent of total capital in1937to59.2percent in1943.Fur thermore,Manchurian Heavy Industries became a state policy corpo- ration in Manchuria,and,as mentioned earlier,was controlled by the Manchukuo government in various ways.To sum up,Nisso ceased to operate as a zaibatsu and both Nissan and Nisso came to have close ties with the government during wartime.

(4)Independent Enterprises As shown in Table4,the number of independent enterprises decreased from29in1929to14in1943.The changes in major indus- tries were as follows: In the electric power industry the number of independent enter prises decreased from nine to four as a result of the state control of electric power carried out in1941.As we have seen,the whole country was divided into nine districts with one electricity distribution com- pany established in each district.Electric power companies in each dis trict assigned hydroelectric plants and small scale electricity transmis sion plants and power lines to the Japan Electric Generation and Transmission Company and electricity distribution equipment and lines to the newly-established distribution company. In the cotton spinning industry,the number decreased from three to two as a result of Osaka Godo Spinning Company's merger with the Tovo Spinning Company in1930. In the paper manufacturing industry,the number decreased from two to zero as a result of the absorption of the Fuji Paper Manufactur-

36 ing Company and the Saghalien Industries Company by the Oji Paper Company in 1932.Oji was a secondrank subsidiary of Mitsui zaibatsu. In banking,the number decreased from two to one as a result of the Sanjushi Bank's merger with the Yamaguchi Bank and the Konoike Bank in1932and the merger of the Dai-Ichi Bank with the Mitsui Bank in1942.The former merger resulted in the Sanwa Bank and the latter in the Imperial Bank. In the gas,silk reeling,wool weaving and private railroad indus tries,the number of enterprises all decreased as a result of their declin ing position. By contrast,Toyo Spinning,Dai-Nippon Spinning,Dai-Nippon Breweries,Dai-Nippon Sugar Manufacturing and Nippon Oil con tinued to be among the top50enterprises.An iron and steel manufac turing company(Kobe Steel Works),a shipbuilding company (KawasakiDockyard),a marine transportation company(Osaka Mer cantile Steamship)and a private railway company(Tokyo Electric Express Railway)appeared for the first time on the1943list. Apart from the electric power industry,in which the number of enterprises decreased largely as a result of state control,in light indus try the number of enterprises decreased by five as a whole (one in cot- ton spinning,one in silk reeling,one in wool weaving and two in paper manufacturing),by two in the gas industry and by one in banking.Of the four enterprises which appeared on the list for the first time,two were in the heavy and chemical industries.The trend toward the heavy and chemical industries in the industrial structure was also clearly apparent in the composition of independent enterprises ranked among the top50,although the change was not as remarkable for the top50 enterprises as a whole. Another important change occurred in the composition of large stockholders of independent enterprises.Table7shows the composi tion of the10largest stockholders in independent enterprises in1929 and1943.The enterprises that appear in this table are independents listed in our ranking table for1943.The electric power industry is excluded because our main concern is to ascertain whether institu tional investors or individual investors were larger stockholders.No change in this respect occurred in the electric power industry during the period with which we are concerned.For1929,forerunners of the enterprises listed in the table for1943are also given,for example,the Sanjushi Bank,the Yamaguchi Bank and the Konoike Bank,which were forerunners of the Sanwa Bank,and the Meguro-Kamata Elec- tric Railway,a forerunner of the Tokyo Electric Express Railway.

37 Table7Composition of10Largest Stockholders of Independent Enterprises in1929and1943 (%) 19291943

Enterpris茎ockholde「s留i麟i欝IC灘slndividualsEnterpris茎ockholde「s識1鵬IC羅 臨slndMduals

膿 繋pinning::1:::;:二1:1}T・y・Spinning8・22・81」3・5

DaiNipPonSpinning5.5-1 .27.ODaiNipPonSpinning7.61.81 .03.1

SanjushiBank4.60.92 .46.9

KonoikeBank85.6-82.913.3 D齋8購 「6 ・92・82・96・ ・D欝 £賭 「22 ・117.44.71,6

DaiNipponBreweries10.82.18 .73.ODaiNipponBreweries13。810 .81.2-

NipPonOil9.11.97.27 .4NipPonOil9.4295.69。5

KobeSteelWorksKobeSteelVVbrks38 .727.2__

KawasakiShipbuilding17・ ・-15・915・2K稀 翻eavy29 .54.22.5- 0豊 鵠 儲ntile3 ・1-1・54・40翻 鋸ntile5 ・81.5・.41.2 M欝 i騨 臨y28・123・54・53・ ・4To農 呂居 購lway25・513.82.922

Source:Diamond Co.Ginko Kaisha Nenkan(Year Book of Banks and Companies)1930;ToyoKeizaiShinpoSha ,Kigyo Tokei Soran(O utlineof EnterpriseStatistics),1943. From Table7it is clear that in1929the proportion of stock held by corporations other than family holding companies in all enterprises listed was smaller than the proportion held by family holding com panies and individuals.This means that in1929a small number of wealthy families were still dominant among the large stockholders of independent enterprises,at least in industries other than the electric power industry. However,the composition of large stockholders rapidly changed. By1943,the proportion of stock held by corporations other than fam- ily holding companies surpassed that held by family holding companies and individuals.The Sanwa Bank was established in1933by a merger of three banks,of which two had very high rates of individual stock holding.In1942Nippon Oil absorbed Ogura Oil,which also had a high rate of individual holdings.Nevertheless,between1929and1943even in these cases the proportion held by institutions rose while the propor tion held by individuals decreased.It is clear that during this period institutional investors came to occupy an advantageous position as large stockholders of independent enterprises in comparison with the small number of wealthy families.Moreover,among institutional investors,life insurance companies occupied a dominant place fol lowed by government banks.Details of the stockholdings of institu tional investors in10independent enterprises in1943are as follows: The position of life insurance companies in the financial market rose with the urbanization of rural areas and an increase in the number of men conscripted into the armed forces.The War Finance Bank estab lished in1942to finance war industries bought stocks in Dai-Nippon Breweries,Nippon Oil and Kobe Steel Works.The Bank of Formosa bought stocks in Dai-Nippon Sugar Manufacturing,which operated mills in Formosa,as well as in Kobe Steel Works,which had been a subsidiary of Suzuki Shoten.Suzuki Shoten had been the largest cus tomer of the Bank of Formosa until its collapse in1927.The Industrial Bank of Japan owned Tokyo Electric Express Railway stock. Paralleling this change in the composition of large stockholders in independent enterprises,family control of these enterprises was reduced.If we look at the relationship between large stockholders and directors,we find that in1929the largest stockholder was also the pres ident in10independent enterprises,but by1943this was only the case in three enterprises.Of these,only Dai-Nippon Sugar Manufacturing was among the top50enterprises in1943.

39 IV.Changes in the Industrial Structure and the Composition of Large Enterprises after World War II

1.Changes in the Industrial Structure Roughly speaking,the postwar era can be divided into three periods:the reconstruction(1945-1955),rapid economic growth (1955-1973)and the post-oil crisis(1973-).Table8shows the change in the industrial structure during these periods. During the reconstruction period,there was on the one hand a return to the prewar structure,and on the other,the reestablishment of a part of the heavy and chemical industries that had developed dur- ing the war.Table8shows that light industries such as cotton spinning, lumber,cotton and spun rayon fabrics,Japanese wine,sugar,wool fabrics and flour milling reappeared in1955among the top20indus tries.The heavy and chemical industries,such as iron and steel,ship building and repair,and electric machinery,had remained in the top20 industries since the war period.Moreover,motor vehicles,chemical fertilizers and chemical fibres,which had just missed the top20in 1942,entered the top20for the first time in1955. During the rapid economic growth period,the heavy and chemical industries underwent a rapid peacetime development for the first time. As shown in Table8,almost all light industries and mining disappeared from the list while many heavy and chemical industries entered for the first time.This trend toward the heavy and chemical industries was led by the development of the following two sets of inter-industry relation ships:

(1)Petroleum refining•\petro-chemicals-synthetic fibres and synthetic resins

(2)Iron and steel•\shipbuilding,industrial machines and durable consumer goods(motor vehicles and household electric appliances). Petroleum refining and plastic products appeared on the list for•@ the first time in1973.Although plastics and chemical fibres were not ranked among the top20,they were close.Motor vehicles,motor parts and attachments,shipbuilding and repair,electrical machinery gener ation,transmission,distribution and industrial use,household electric appliances,and radio and TV sets rapidly improved their positions or appeared for the first time on the list. After the oil crisis,the basic framework of the industrial structure was maintained,but computerization had an effect on the structure to some extent.Other types of electronic equipment,computers and accessories,and integrated circuits closely connected with this trend

40 appeared on the1983list.

2.Changes in the Composition of Large Enterprises by Industry Changes in the composition of large enterprises during the recon struction period differed somewhat from the changing pattern of the industrial structure.The number of enterprises in light industry increased from six in1943to eight in1955,but this was still a net decrease of six since1929.The main causes of this decrease were the break-up of the Oji Paper Co.,part of the deconcentration policy,and the decrease in the concentration ratio of production by top rank pro ducers in cotton spinning and sugar manufacturing as a result of the change in industrial organization. On the other hand,there were19enterprises in the heavy and chem ical industries that not only surpassed the1929figure of two,but also that of15in1943.The number of enterprises in chemical fibres and petroleum refining increased remarkably.This was brought about by the high profits earned by earlier manufacturers in the rapidly develop ing synthetic fibre industry and the high profits of major companies in petroleum refining.These were in turn the result of the foreign exchange allotment system and the limitations on new entry set by the government.Most enterprises that appeared on the list during the war period remained among the top50in1955. There is a close correlation between changes in the composition of large enterprises during the rapid economic growth period and the post-oil crisis years and the changes that occurred in the industrial structure.From1955to1973,the number of major enterprises in light industries decreased from eight to only one,while the number in heavy and chemical industries increased from19to21.The increase in elec trical machinery and motor vehicles was particularly conspicuous. Large enterprises in the manufacturing industry came to be almost entirely composed of enterprises in the heavy and chemical industries. Electrical machinery and motor vehicle manufacturing led the development of these industries. After the oil crisis,heavy and chemical industries still occupied an overwhelmingly dominant position,but within these industries the number of enterprises in electrical machinery increased from seven to 13,while the number in iron and steel decreased from four to one,and that in chemical fibres from three to zero.A trend toward a higher degree of processing in the heavy and chemical industries led by com puterization also became apparent.

41 Table8Changes in Industrial Structure after World WarII(1929•`1983)

19291955 ProductionProduction lndustry 。×畿Slndustry。 臨s RevenueRevenue

Rawsilk795,599Nationalrailways262,965

Cottonspinning678,466Electricpower258,287

Electricpower658,316Pigiron(byblastfurnace)andsteel232,444 manufacture,androlling

Broadcottonfabrics526,096Cottonspinning185206

Nationalrailways517,795Lumber171 ,241

Japanesesake302,120Coalmining165 ,081

Coalmining245,762Steelmanufactureandrolling162 ,195

Privaterailways232,254Cottonandspunrayonfabrics156 ,736

Militaryordnance208,537Japanesesake154 ,047

Government-operatedsteelmill189,551Chemicalfertilizers136 ,464

Printing186,304Sugar133 ,010

Woolfabrics176,896Steelmaterialsmanufacture131,516

(excludingsteelmanufacturing)

Steelproducts173,833Motorvehicles124,683

Sugar158,125Woolfabrics113,063

Flourmilling134,895ChemicalfibresIO9 ,345

Chemicalfertilizers132,711Shipbuildingandrepairing108 ,702

Broadsilkfabrics129,516Flourmilling107 ,066

Lumber112,170Woolandworstedspinning104 ,438

Non-ferrousmetalsmining108,204Electricmachineryforgeneration ,91,469 transmission,distributionand industrialuse

CoPPer108,166Foreignpaρerandpulp90 ,032 manufacture

42 (Prewar:Thousands of Yen,Postwar:Millions of Yen)

19731983 ProductionProduction lndustry。 溜 含slndustry。 畿s

RevenueRevenue

Motorvehicles4,392,780Motorvehicles13,642,578

1ronmanufacturebyblastfurnace3,762,017Petroleumrefining12,827,262

Motorvehiclepartsand3,127,502Electricρower11,702,100 attachments

Plasticproducts2,588,406Motorvehiclepartsand10,059,320 attachments

Electricalmachineryfor2,485,326Plasticproducts6,792,458 generation,tranSmiSSiOn, distributionandindustrialuse

Petroleumrefining2,460,5631ronmanufacturebyblastfurnace6,227,203

Electricpower2,345,815Electricalmachineryfor5,559,851

generatiOn,tranSmiSSiOn,di stributionandindustrialuse

Shipbuildingandrepairing2,054,758Printing4,390,704

Lumber1,918,508Audioequipment3,872,053

Steelmanufactureandrolling1,611,149Partsforotherelectronicand3,542,724 communlcatlonapParatus

Printing1,528,586Nationalrailways3,490,200

Nationalrailways1,379,1000therelectronicequipment3,189,017

Audioequipment1,367,598Householdelectricalappliances3,090β83

Electricwireandcables1,261,083Medicine3ρ82,308

Metalproductsforconstruction1,228,434Electroniccomputersand3,067,172 aCCeSSOrleS

Householdelectricappliances1,149,088Steelmanufactureandro川ng2,664,538

Partsforotherelectronicandt123,209Plastic2,32t404 communlcatlonapParatus

MedicineljO9,0871ntegratedcircuits2」83,939

RadioandTVsets1,078,060Metalρroductsforconstruction2,179,329

Constructionandmining1,034,550Shipbuildingandrepairing2」05,558 machinery

Sources:Tsusansho(Ministry of Industry and Trade),Kogyo Tokei Hyo(Census of Manufactures);Honpo Kogyo no Susei(Trend of Japanese Mining Industry); Denryoku Hakusho(White Paper on Electric Power);Unyusho(Ministry of Transportation),Unyu Hakusho(White Paper on Transportation). 3.Dissolution and Reorganization of Special Companies and Special Banks Before we turn to the changes in large enterprises by type of enter prise,something must be said concerning the reorganization of special companies and banks,zaibatsu dissolution and the formation of post war business groups. After the war,most of the special companies were dissolved or split up by the government.The Manchurian companies lost their foreign assets and were disbanded.Japan Iron and Steel became a private company and was divided into the Yahata Iron and Steel and Fuji Iron and Steel.Nippon Express also became a private company.Japan Electric Generation and Transmission and the nine electric distribu tion companies were reorganized under the Electric Power Industry Reorganization Ordinance in1951to become nine privately-operated public utility companies.They undertook integrated generation, transmission and distribution functions,monopolizing the business in each district. The reorganization of the special banks was carried out in three ways.Some became private banks like the Hypothec Bank of Japan and the Yokohama Specie Bank.A second group became debenture issuing banks under the Long-Term Credit Bank Law issued in1952. The Industrial Bank of Japan took this option.The Japan Long-Term Credit Bank,which had given its name to the law,and the Japan Real Estate Bank,which subsequently became the Japan Debenture Credit Bank,were both established in1952.A large part of the debentures issued by them were bought by city banks. Apart from these two methods of reorganization of special banks, there was a further method,but this was not directly connected with the prewar special banks listed in Table2.After the war,several new government financial institutions were established to take charge of treasury investments and loans starting in1953.The Japan Develop ment Bank and the Export-Import Bank of Japan belonged in this category.The origins of the former went back to the wartime Finance Bank established in1940.

4.Zaibatsu Dissolution After World WarII,the Occupation authorities undertook to dis solve the zaibatsu.First,the members of56zaibatsu families were pro hibited from occupying the position of director in enterprises belong ing to zaibatsu.Second,stocks in zaibatsu enterprises owned by zaibatsu families and zaibatsu holding companies were disposed of by

44 a Holding Company Liquidation Commission(HCLC).The number of holding companies designated as such by the HCLC amounted to 83.After the disposal of the stocks they held,the holding companies were dissolved.In addition,zaibatsu subsidiaries were designated as restricted concerns•f(478companies),•esubsidiaries•f(131companies) •e and•eaffiliates•f(161companies).Mutual stockholdings in these enter prises were sold to the public under the supervision and guidance of the HCLC.These measures severed capital ownership ties,both vertical and horizontal,which held the zaibatsu combines together. Third,large enterprises that occupied an excessively dominant posi tion in each industry were dismantled.Mitsui Bussan and Mitsubishi Shoji were each split up into more than100units in1947.Under the Law for the Elimination of Excessive Concentrations of Economic Power implemented in1947,14other enterprises were broken up, including Japan Iron and Steel,Mitsubishi Heavy Industries,and Oji Paper Co.Airplane manufacturers and electric power companies were also dismantled under the terms of the Ordinance for Industrial Reconstruction and Reorganization and the Ordinance for Electric Enterprise Reorganization.This deconcentration policy contributed to making Japanese industrial organization more competitive.

5.Formation of Financial Groupings Enterprises affiliated with the old zaibatsu began to organize new business groups after Japan regained independence in1952.They began to use the old zaibatsu name,which had been prohibited by the government.Many of the trading companies established as a result of the dissolution of Mitsui Bussan and Mitsubishi Shoji moved towards merger.A new Mitsubishi Shoji was established in1954.Mitsui line trading companies also merged into two large companies in1955,and these in turn merged to form a new Mitsui Bussan in1959.Enterprises affiliated with Mitsui and Mitsubishi assisted in the establishment of these companies. Roughly parallel with this process,former zaibatsu enterprises organized presidents'clubs and similar means for consultation.In 1950,Mitsui organized a club,the Getsuyo Kai,composed of employees above the rank of executive director from each member company.Mitsubishi began to make its presidents'club,the Kinyo Kai,function as a top level liaison committee of affiliated companies around the time of the establishment of Mitsubishi Shoji.Sumitomo started a presidents'club,the Hakusui Kai,in1951.In1960,Mitsui's Getsuyo Kai was reorganized as a presidents'club and renamed

45 Nimoku Kai. Mutual ownership of stocks among affiliated companies also developed.From September1954to March1958,the mutual stock holding ratio in Mitsui(18companies)rose from9.9percent to12.2 percent,in Mitsubishi(22companies)from17.1percent to20.2per cent,and in Sumitomo(14companies)from16.4percent to19.8per cent.18Affiliated financial institutions occupied a key position in this mutual ownership. Nevertheless,the most important factor in the formation of new business groups was the financing of affiliated companies(keiretsu yushi),which meant particular financial institutions concentrating their loans on particular industrial companies.We can trace the origins of keiretsu yushi back to the1944system of designating a specific financial institution to make advances to munitions plants.Under this system,a particular financial institution was designated and a joint financing group organized to supply funds to each munitions plant. The designated financial institution supplied to the munitions plant funds that it received from the joint financing group.Through this sys tem,a tie between industrial enterprises and large city banks was formed.This tie was broadened and strengthened after the introduc tion of this system,as the money for munitions came to be paid mainly by advances to munitions plants on the security of order certificates from the army. This tie continued to exist after World War‡Ubecause industrial enterprises'dependence on bank loans increased as a result of the loss of foreign assets and the decrease in equity capital in the course of post war inflation.In September1950,the six main financial groupings' borrowing from affiliated banks and insurance companies as a propor tion of total borrowing was as follows:19 Financial ties between industrial companies and affiliated financial institutions came to occupy a key position in postwar financial group ings,replacing the capital ties so important in the prewar zaibatsu. These new ties were strengthened by mutual stockholding.In addi tion,the presidents'clubs functioned as top level liaison organizations for affiliated companies.However,their functions were limited to information exchange,coordination of the interests of affiliated com panies and decision making for particular problems,such as utilization of trademarks and cooperative ventures within the group.To sum up, the postwar financial groupings were loose combinations of ente prises. The loose nature of these combinations is also revealed in the struc

46 Table9Borrowing by Non-Financial Enterprises among the Largest50Enterprises from the Japan Development Bank,the Export-Import Bank,the Industrial Bank of Japan, the Long-Term Credit Bank of Japan and the6Largest City Banks(1973)

Note:JDB signifies the Japan Development Bank and EIBJ the Export-Import Bank of Japan .IBJ signifies the Industrial Bank of Japan and LCBJ Long-Term Credit Bank of Japan. Source:Tokyo keizai Shinpo Sha,Kigyo Keiretsu Soran(Outline of Business Affiliations),1974.47

•Ef•¹—ÕesŽYŠÔL”b•˜JMitsuiMitsubishiSumit•Em•EFujiSanwa‘Ë1•EthersMitsui26.814.318.1497.33.94.07.233.5Mitsubishi410.97.73.027.83.03.13.48.232.9Sumitomo11.119.92.15.831.12.32.00.934.8Fuji43.911.71.74.910.524.63.02.836.9Sanwa13.411.52.53.13.415.324.76.130.ODaiichi-Kangyo12.215.46.57.813.9273.611.836ƒRlndependent184.518.88.26.59.35.34.54.338.6 ture of borrowing from financial institutions,as shown in Table9.This table shows that in Mitsui,Mitsubishi,Sumitomo,Fuji and Sanwa the proportion of total borrowing from affiliated financial institutions was higher than that from other financial groups,but even in the case of Sumitomo,the highest,this proportion was only about30percent.In the case of Dai-Ichi Kangyo the proportion was only11.8percent,less than the amount of borrowing from Sumitomo-related financial institutions.Roughly speaking,it can be said that it was government financial institutions,long-term credit banks and the six largest city banks that in fact jointly financed the largest industrial enterprises. The so-called financial groupings should therefore be considered sub systems of a de facto joint financing system to the largest industrial enterprises organized by the above mentioned financial institutions. The main bank of a group of affiliated enterprises played a role akin to that of a•esecretary•fbank in this de facto joint financing.

6.Changes in the Composition of Large Enterprises by Type of Enterprise

The relationship between special companies and the government and that between special banks and the government changed consider ably.Before World War‡U,these enterprises were semi-governmental corporations and could freely dispose of their net profits.In contrast to this,after World War‡U,government institutions wholly owned by the

government had to pay the government the part of their profits that remained after the deduction of prescribed reserves.The number of this kind of enterprise,excluding the Bank of Japan,decreased from four in1929to only one in1955and1973,and two in1984,which were the Japan Development Bank and the Export-Import Bank of Japan. During the reconstruction period(1950-1954),the Japan Develop ment Bank supplied funds mainly to rebuild major industries such as coal mining,iron and steel manufacturing,shipping and electric

power,but the emphasis of its activities gradually shifted towards the supplying of funds for regional development,the prevention of environmental pollution and the securing of natural resources and energy.The Export-Import Bank of Japan has mainly acted to pro mote the export and import of goods and capital.As a whole,the gov ernment's position in the top50enterprises declined after World War .As shown in the case of the Japan Development Bank,the ‡Utie between governmental financial institutions and main industries weakened during the postwar period.The position of private enter

prise,in other words,was improved immediately after the war,and

48 this trend continued during the postwar years .After the oil crisis,the situation changed somewhat,as shown in the strengthening position of the Export-Import Bank of Japan.Reliance on this bank increased with the internationalization of Japanese enterprises. Looking at enterprises affiliated with a postwar business group, Table4lists those enterprises which were members of a presidents' club.For the Fuji,Sanwa and Dai-Ichi Kangyo groups ,which did not have a presidents'club in1955,the companies that were affiliated in 1973are assumed to have already been affiliated with their particular financial grouping in1955.In the case of the Dai-Ichi Kangyo chain , which did not start a joint presidents'club until1978 ,enterprises that were members of one of the following three presidents'clubs are included:the Furukawa chain's Sansui Kai,the Kawasaki chain's Mutsumi Kai and the Kangyo Ginko's Jugosha(Fifteen Companies) Kai.Two companies affiliated with more than one business group , namely the Hitachi Co.and Japan Express,were regarded as indepen dent. From Table4we see that there were23enterprises affiliated with postwar financial groupings in both1955and1973,declining to19in 1984.If the enterprises that disappeared from the list and appeared on it for the first time during1973-1984are classified according to indus try,we get the following: The trend away from the processing of raw materials toward more advanced processing industries is also reflected here ,because business groups occupy a larger position in the latter industry than in the former.A more important point regarding the postwar business groups was that the ties combining member enterprises were looser than those in the prewar zaibatsu.First,the postwar groupings utilized the stock market more aggressively than had the zaibatsu.For exam ple,the average number of stockholders of the22-24enterprises affiliated with business groups increased from8 ,167in1943to38,418 in1955and then to74,776in1973.20The almost complete ownership of affiliated enterprises'stocks by zaibatsu headquarters was virtually wiped out after World War‡U.Table10shows that the mutual stock holding ratio among affiliated enterprises with the same bank amounted at the most to only25.4percent,far lower than that of the zaibatsu.Second,as stated earlier,the financial ties were also rather loose and enterprises affiliated with specific financial groupings bor rowed money from almost all the other large city banks,as shown in Table9.By doing so,they were able to adapt to changes in the indus trial structure more smoothly than might otherwise have been the case.

49 Table10Stockholding of the6Largest City Banks and the2Largest Life Insurance Companies in Non-Financial Enterprises among the Largest50Enterprises(1973)

Tbtalholding..EŒªls’¦ŒysL’•JMitsuiMitsubishiSumit•Em•EFujiSanwa’•‚Ælnll”lceln–ÙeGroupMitsui29.41.48.91.01.0--1.73.44.1Mitsubishi427.81.40•B625.40.71.50.42.12.62.OSumitomo121.25.70.50.618.60.7-0,54.01.3Fuli412.33.00.52.04.016.20.72.23.72.7Sanwa14.22.2-0.82.94.84.22.05.81.3DaiichƒgKangyo17,04.21.32.7-ˆêˆê7.04.11.81ndependent18-2.22.63.34.01.61.5212.21.4Source:Table9.50 The number of independent enterprises was consistently greater than the number of enterprises affiliated with a business group.Good business opportunities were frequently opened up for them because of the rapidity of changes in the industrial structure in postwar Japan. Tables9and10show that independent enterprises,unlike those belonging to a business group,did not depend on a particular bank for borrowing or on a particular group for stock ownership.However, their dependence on a group consisting of government financial institutions,long-term credit banks and the six largest city banks amounted to61.4percent in1973,almost the same as the average figure for enterprises belonging to business groups.Independent enterprises were also included in the de facto joint financing system operated by the above mentioned group of large banks.

V.Conclusion

Japanese industrial structure changed rapidly during the last50 years or so.Its focus shifted from mining and light industries,espe cially textiles,at the end of the1920s to the heavy and chemical indus tries during World War II and the rapid economic growth that fol lowed.It continued to evolve away from a heavy and chemical indus trial sector,consisting mainly of two sets of inter-industry relation ships,toward focal machine industries,particularly the automobile and electrical machinery industries. It follows that the extent to which enterprises were able to adapt to this change substantially affected their performance.In terms of pro fits,the composition of the top50enterprises also changed dramati cally.From Table2we see that the number of enterprises which were added to or removed from the list during the various periods was as fol lows:

The periods between1929and1943and between1943and1955 were greatly affected by wartime controls and postwar reform,espe cially state control and the reorganization of electric power.If we exclude electric power companies from the above figures we get the following:

Roughly speaking,during the period of1929to1973,20-27 enter prises left or joined our list,and the equivalent number for1973-1984 was as high as20,some40percent of the total number.The dynamics of both Japanese industry and competition among enterprises in Japan

51 are apparent here.The origin of such dynamics lies in Japan's ability to sufficiently utilize its advantages as a less developed country and advance its industry rapidly by importing a succession of advanced foreign technologies.The ability of the Japanese people to absorb foreign technology,based on the high level of mass education,assisted this pattern of industrial development. At the same time,we should not overlook the fact that a new type of enterprise appeared despite the existence of both zaibatsu and busi ness groups.For example,during1929-1943several new zaibatsu appeared and the strategies they adopted were of a totally new charac ter.As we have seen,these new zaibatsu aggressively entered the heavy and chemical industries,mobilized capital widely from the pub lic and made good use of the stock market. After World War II,business groups became more active than zaibatsu in entering newly developing industries because affiliated enterprises came to be controlled mainly by professional managers. Nevertheless,there was still room for newcomers.In general,enter prises affiliated with business groups had an advantage over their inde pendent competitors,especially when producer goods or capital goods were concerned.Mutual assistance among member enterprises worked most effectively in dealing with goods of this kind.However, leading industries during and after the rapid economic growth period moved into the durable consumer goods industries,such as manufac turing automobiles and household electrical appliances.Enterprises that entered rapidly into these industries and pursued consumer oriented strategies managed to secure dominant positionsin these fields.Matsushita,Sanyo,Sharp,Sony and Honda are examples of this.Moreover,technologically intensive fields such as IC and new ceramics,which have recently developed rapidly,enjoyed fewer economies of scale compared with the'heavy,thick,long and large' industries.Therefore,even enterprises outside a business group could develop rapidly if they had sufficient technology.TDK,Matsushita Electronics Works and Kyocera are examples. These enterprises are promoting a far greater variety of personnel to be directors.From Table11it is clear that the proportion of all direc tors graduating from the former imperial universities or equivalent institutions was only35percent on average,while the proportion of enterprises that were leaders in their field and whose history went back to the prewar period was between67percent and96percent.These enterprises were also adopting new policies for personnel. In closing,the dynamic character of Japanese industry has resulted

52 Table11 Composition of Directors by School Career(1984)

黙1黙IU糠sH騨69曽 灘 臨 瀧IU鷹iesU8膳es・thers瀦

Matsushita1941588458151512100

Sony3131010359734100

TDK101020105020100

Kyocera1371030332313100

Matsushita Electronics9918365599100 Works

Sharp841224202432100

Sanyo44714292532100

Honda164204040164100

Tbyota119402117213132100

Hitachi5013133383133100

Tbshiba377441567430100

Mitsubishi Heavy5011298983100 Industries

NipponSteel 6313154296221

Nippon60815833151・ Stell Tube ・

Source:Nihon Keizai Shinbun Sha;Kaisha Nenkan(Year Book of Companies)1985;Diamond Co.,kaisha Shokuin Roku (List of Personnel in Companies)1985.

53 mainly from the orientation to the import of technology in its pattern of development and the Japanese people's ability to absorb foreign technology.In addition,the vigorous entrepreneurship of managers in newly developing enterprises,accompanied by the rapid development of industry,made a substantial contribution to rendering competition

between large enterprises in postwar Japan dynamic .

Notes

1.Shokosho(Ministry of Commerce and Industry),Kaisha Tokei Hyo(Statistics of Corporations)1929. 2.Jyuro Teranishi,Nihon no Keizai Hatten to Kinyu(Japan's

Economic Development and its Financing),Iwanami1982,p.198 . 3.The amounts of deposits of the10largest banks at the end of1910 were as follows(in\1,000): Mitsui90,248;Dai-Ichi52,834; Sumitomo44,110;Yasuda34,006;Mitsubishi33,695;Daisan 31,128;Naniwa 29,682;Konoike26,436;Kitahama25,808;San

jyushi24,816;Kanji Ishii,•gChiho Ginko no Seiritsu Katei•h(The Process of Formation of Local Banks),Chiho Kinyu Shi Kenkyu

Journal of Local Financial History)No.3,p.15 . ( 4.The description of the South Manchurian Railway and the three

special banks is based mainly on Nihon Shihonshugi Hattatsushi no Kiso Chishiki(Basic Information on the Development of

Japanese Capitalism),edited by Kaichiro Oishi and Kenichi

Miyamoto,Yuhikaku,1975,pp.90-91,196-198,230-231 . 5.Ginko Kaisha Nekan(Year Book of Banks and Corporations) 1930. 6.Computed on the basis of Kamekichi Takahashi,Nihon Zaibatsu no Kaibo(An Analysis of Japanese Zaibatsu),Chuo Koron Sha, 1930,pp.65-6,71. 7.Ibid.,p.71.

8.Op,cit.,Ginko Kaisha Nenkan,1930 . 9.Tomio Yamamoto ed.,Hi Keizai Horei Dai Shusei-Zoku Hen-Dai Ikkan(Compendium of Laws and Regulations Con cerning the Economy under Emergency-Sequel Vol.1)Diamond Co,.1938,pp. ,557-560;Kinya Hashimoto,Sodoin Tosei Hoki, Laws and Regulations for National Mobilization and Control),(

Bunka Kenkyu Sha,1943,pp.271-277 . 10.Tomio Yamamoto ed.,Hijyoji Keizai Horei Dai Shusei(Compen dium of Laws and Regulations Concerning the Economy under

Emergency),Shinbi Shoin,1983,pp.792-795 .

54 11.Ibid.,pp.189-201. 12.Manshukoku Sangyobu(Ministry of Industry,Manchukuo)Man shukoku Sangyo Gaikan(Outline of Industries in Manchukuo), 1939,pp.297,f301,306-308. 13.Heisa Kikan Seiri Iinkai(Closed Institutions Liquidation Com mission),Heisa Kikan to Sono Tokushu Seisan(Closed Institu tions and their Special Liquidation),1954,pp.412-416,439-440. 14.Ibid.,pp.245-248,371-376,494-495;Masaru Udagawa,Showa Shi to Shinko Zaibatsu(Showa History and the New Zaibatsu), Kyoikusha,1982,pp.176-188. 15.Op.cit.,Ginko Kaisha Nenkan,1930;Kigyo Tokei Soran(Out line of Company Statistics),Toyo Keizai Shinpo Sha,1943. 16.Figures for1937are derived from Kabushiki Kaisha Nenkan Year Book of Stock Companies),Toyo Keizai Shinpo Sha,1938.( 17.Udagawa,op.cit.,pp.205-210. 18.Toyo Keizai(Oriental Economist).Special Issue for New Year 1961,p.79. 19.Buhei Miyashita,•gZaibatsu no Saiken•h(Reconstruction of Zaibatsu),in Koichiro Suzuki Gendai Nihon Shihonshugi Taikei- Dokusen ShihonI(Outline of Contemporary Japanese Capitalism -Monopoly Capital I),Kobundo1958,p.116.

20.The figures for both1955and1973are derived from Jojo Kaisha Soran(Outline of Listed Companies)Tokyo Stock Exchange 1955;Kaisha Nenkan(Year Book of Companies)Nippon Keizai Shinbun Sha,1974.

55