Japanese Yearbook on Business History-1991/8 Corporate Groups and Keiretsu in Japan Masahiro SHIMOTANI THE ISSUE Of several issues that have been discussed in Japan-U.S.Struc tural Impediments Initiatives talks since1989,attention has fo cused on Japan's keiretsu as being particularly important.Yet, when we look closely at the contents of those discussions,we find several conceptual confusions engendered still more confusion in the debate.One example of this can be seen in the way the•gsix large corporate complexes•hand•gcorporate groups•h(discussed below),two aggregates of completely different dimensions,are mixed up in discussions.Again,even though the term•gkeiretsu has a double-faceted meaning,that of expressing,in •h regard to var ious enterprise aggregates in Japan,1)the properties of relation ships between firms,and2)the structural aspect that is the foundation of those relationships,it would seem that debate has hitherto proceeded with complete indifference to such a distinc tion.There is,therefore,a need for these confusions to be cor rected as quickly as possible,if constructive discussion is to go ahead. Furthermore,when discussing such corporate aggregates and keiretsu in Japan,it is also necessary to make perfectly clear their historical formation processes and their places in history.Numer 4JAPANESE YEARBOOKON BUSINESS HISTORY-1991/8 ous analyses of corporate aggregates and keiretsu,dealing with their states at different times,have been amassed in Japan.Yet few of them represent studies incorporating a consistent examination of their historical formation processes from before World War II through to the present day.Whether corporate complex or keiretsu,they are products of history.In addition,because the•gag gregates•hcreated by corporations played such an extremely im portant role in the Japanese economy from before the war right through the postwar period,a consistent,correct understanding of them during the whole of that interval is being sought today.In the pages that follow I shall first survey the present situation,then the prewar situation;finally,I shall summarize the whole. THE TWO-STAGE TIERED STRUCTU OF CORPORATE AGGREGATESRE As shown in table1,a typical aggregate of enterprises in present day Japan can be grasped as a tiered structure,that is,as a two stage tiered structure consisting of a•gcorporate complex•hand corporate groups,•hwith the two different stages based•g on quali tative content.Table1presents the case of one of the•gsix large corporate complexes•h(the Mitsubishi•gcorporate complex•h)and a few of the•gcorporate groups•hthat form it. THE SIX LARGE CORPORATE COMPLEXES The term•gsix large corporate complexes•hrefers to Mitsubishi, Mitsui,Sumitomo,Fuyo,Sanwa,and Daiichi-Kangin.A•gcorpo rate complex•his a loose coalition formed by autonomous giant corporations.The number of core corporations(what I later de scribe as members eligible to attend the•gshachokai"[presidential meeting])constituting each corporate complex varies from com plex to complex.Some have as few as20corporations,some have as many as40;Mitsubishi has29.Characteristic features of the structure of the six large corporate complexes are:a)their mem ber corporations reciprocally own one another's shares;and b) they all have their•gshachokai•hserving the function of an informal Table1.The Mitsubishi Corporate Complex and Reciprocal Shareholdings The Mitsubishi Corporate Complex(29Member Companies of tbe Presidential Meeting[Friday Meetingl]) 持 Ω司ParentMitsubishiTbkyoMitsubishiMitsubishiMitsubishiMitsubishiMitsubishiEllterpriseowner一 垂塁罵;論 ㎞;8惣騨;;1準Ch;;;kEk舞 讐 恥 黙 晦 Ω喝・こ ぎB・nk生3】 」3・ ・3Mα4羅252 器M撃Fi「e生923L90●20940'1舗22'6窮玉 "dmg4'96口03"0'2140麗32●8 妥 蜜HeavyInd・3・62・11・60・ 】0・90Σ 当20・3 鎌 嵩i警1…;ill…11～ 。 似21夢1… …; ΣM。t。rs4 。52.08.225.80.40.853.5 (This chart was produced on the basisof data given in the1991Yuka shoken hokokusho Securitiesreport]and Kigyo keiretsu soran[Conspectusof [corporate keiretsu].) SHIMOTANI:Corporate Groups and Keiretsu5 6JAPANESE YEARBOOK ON BUSINESS HISTORY-1991/8 get-together organization.Let us consider each of these features in turn. An important feature of the shareholding structure in Japan is that the ratio of corporate holdings to individual holdings is ex tremely high.Corporate holdings first outstripped individual holdings sometime around1965,and at present they exceed70%. Thus,a check of the shareholder makeup of the principal large corporations in Japan would show corporate shareholders occupy ing,with rare exceptions,all the top positions among major share holders.These corporate shareholders are banks,insurance companies,and other large corporations.Additionally,and this is an important point to notice,the matter does not stop with corpo rate shareholders showing an overwhelming majority.In the six large corporate complexes the members reciprocally own one another's stocks(note the lower portion of table1).This means that,for each member corporation,the other members are large shareholders,and it itself is at the same time a large shareholder of each of the others.The total percentage of such reciprocally held shares is,in the case of Mitsubishi,the•gcorporate complex•h with the highest percentage,26.4%. The•gpresidential meetings,•hmost frequently held in the form of monthly luncheons,are informal•goccasions for reaching un derstanding and exchanging information•hamong company pres idents.Mitsubishi's is called the•gFriday meeting,•hand the one in charge of organizing it is reported to be selected by a vote.This does not mean that•gpresidential meetings•hfunction as a•gcontrol tower•hfor the•gcorporate complex•has a whole,for in principle there is never any intervening in the decision making of any indi vidual members.As we shall see later,this is a major departure from the structure of the prewar zaibatsu(at least until about 1935),in which decisions made by zaibatsu head offices(the hold ing companies),acting as control towers standing above member corporations,were executed by those affiliated member corpora tions.True enough,each of the first three•gcorporate complexes•h named earlier are descended from the three major prewar zai batsu (Mitsui,Mitsubishi,and Sumitomo),and the next three larg SHIMOTANI:Corporate Groups and Keiretsu7 est•gcorporate complexes•hof Fuyo,Sanwa,and Daiichi-Kangin are similar,with Fuyo having descended from the prewar Yasuda Zaibatsu and Sanwa and Daiichi-Kangin each having several small zaibatsu mixed in among their membership.Still,these postwar corporate complexes•hare completely different from the •gprewar zaibatsu,both in ownership structure and in organizational struc ture.It is common knowledge that the biggest step in zaibatsu dis solution after the war was the purging of the zaibatsu families and the dissolution of the pivotal zaibatsu organizational structure,the zaibatsu head office•h(the holding company).Also well•g known is the fact that,as a result of the Anti-Monopoly Law,even today the establishment of a pure holding company is forbidden.Accord ingly,it is fundamentally impossible for the•gpresidential meeting•h to intervene in the decision making of member corporations in postwar•gcorporate complexes.•hIt is for this reason that I referred earlier to•gcorporate complexes•has loose coalitions.At the same time,however,we must keep in mind that,since member corpo rations hold one another's shares,in effect every presidential meeting virtually is fulfilling the role of a general meeting of shareholders at which the large shareholders are in attendance. Member corporations allowed to attend the presidential meet ings are the key enterprises in the•gcorporate complex.•hSince these enterprises did not have holding companies over them as in prewar days,they started out as loose coalitions of companies holding one another's stocks,but later,especially in the1960s, they speeded up the process of reciprocal shareholding for the principal purpose of creating stable shareholders.In those cases, but especially in the cases of the Fuyo,Sanwa,and Daiichi-Kangin corporate complexes,•hthe network of financing by•g the large city banks that formed the core of each•gcorporate complex•hplayed an important role in the formation of their respective complexes.In addition,each•gcorporate complex•hcontained its own general trading company(sogo shosha),which,by actively undertaking the role of buying and selling the goods of member corporations and of providing them with information,gave the•gcorporate complex•h unity.In addition to these large city banks and trading companies, 8JAPANESE YEARBOOKON BUSINESS HISTORY-1991/8 the giant corporations making up the•gcorporate complexes•halso included insurance companies,principal manufacturers,and large enterprises in the service industries-all of them together representing a major part of Japan's total economy.And by reason of the fact that each of the•gcorporate complexes•hhas vied with the other•gcorporate complexes•hto make inroads into each of the im portant industrial sectors,the effect has been that all the•gcorpo rate complexes•hhave fairly similar structures(known as•gone-set systems•h). CORPORATE GROUPS Again as can be seen from table1,individual member corporations making up the•gcorporate complex•hpresidential meeting,and even independent corporations not belonging to the•gcorporate complex,•hare each in turn a parent company forming a group with numerous subsidiaries.I have chosen to call these organic structures(made up of a central parent company with numerous subsidiaries under its control)•gcorporate groups.•hIn