The Financial Behavior of Japanese Corporations

The Japanese government has long played a central role in fostering industrial development, seeing it as essential to Japan's prosperity and national strength. Corporate objectives are focused on market share and growth, rather than return on investment or stock prices as in the United States. Western terms have been grafted onto Japanese practice, often taking on quite different meanings and significance in the process. Japanese society has not made a clear distinction between private and public. The government has long played a key role in guiding Japanese industry. Government ministries arbitrate disputes, facilitate capital investment, provide tax incentives to targeted sectors, and assist depressed industries. Constant interaction between industry and bureaucracy aims at maintaining the momentum of the economy. Japanese industry is dominated by formally autonomous but closely aligned confederations linked by mutual shareholding, interlocking directors, joint trademarks, common trading companies, and inter firm business. Group firms generally have lower profits and growth rates than non-group firms, but much greater stability. Corporations are particularly dependent on close ties to their banks and to the general trading companies, which largely control distribution and provide important financial services. Interdependence is central to success, enabling firms to expand in prosperous times and weather adversity.