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Topic 4 – Japan and its Corporate Hegemony. A – Geography and the Insularity of Japan B – Japanese Development C – The Corporate and Industrial Hegemony. A. Geography and the Insularity of Japan. 1. Location In which way the location of Japan is unique? 2. Maritime Orientation

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topic 4 japan and its corporate hegemony

Topic 4 – Japan and its Corporate Hegemony

A – Geography and the Insularity of Japan

B – Japanese Development

C – The Corporate and Industrial Hegemony

a geography and the insularity of japan
A. Geography and the Insularity of Japan

1. Location

In which way the location of Japan is unique?

2. Maritime Orientation

How the ocean is influencing the Japanese society?

3. Demography

What characterizes the Japanese population?

4. Resources

Is Japan lacking resources?

1 location and insularity
1. Location and Insularity
  • Location
    • “jih-pen” in Chinese (sun’s origin):
      • Since Western civilizations encountered China before Japan, the name “Japan” stuck.
    • Nihon (or Nippon), meaning “Source of the sun”.
    • Relative isolation in Pacific Asia:
      • Insularity.
      • Do not share a land border with any country.
    • Maritime access:
      • Shimaguni (island country) / insularity.
      • Labeled as the Great Britain of the Pacific.

Contemporary Flag

Imperial Flag

changes in japan s relative location
Changes in Japan’s Relative Location

From Terminus…

Limited outside influence (insularity).

Writing, Buddhism and Confucianism came from China, via Korea.

Protected from Chinese (Mongol) and Korean invasions.

End of maritime roads from Europe.

Closest Asian country from North America.

Core of the transpacific trade.

… To Hub

2 maritime orientation
2. Maritime Orientation
  • Maritime space
    • 4 islands; 98% of the land mass:
      • Hokkaido (83,400 km2).
      • Honshu (231,100 km2).
      • Shikoku (18,700 km2).
      • Kyushu (42,100 km2).
    • 3,500 islands in two major groups (Ryukyu and Bonin).
    • Several large bays:
      • Tokyo, Nagoya and Osaka.
      • Important concentration of port infrastructures and urban regions.
    • Arc of over 1,700 miles.
    • Coastline:
      • 19,000 miles.
      • 3rd in the world behind Russia and Australia.

Russia

Russia

China

Hokkaido

Sea of Japan

North Korea

Honshu

South Korea

Tokyo Bay

Nagoya Bay

Shikoku

Kyushu

Osaka Bay

2 maritime orientation1
2. Maritime Orientation
  • Linking the main Japanese islands
    • Required the construction of bridges and tunnels.
    • Impressive engineering achievements.
    • 1) Seto-Ohashi bridge:
      • Shikoku/Honshu.
      • Naruto Strait.
    • 2) Kanmon bridge:
      • Strait of Shimonoseki.
      • Kyushu/Honshu.
    • 3) Seikan tunnel:
      • Tsugaru Strait (Honshu/Hokkaido)
      • 33 miles, 1988, longest in the world.

Hokkaido

3

Honshu

2

1

Shikoku

Kyushu

2 maritime orientation2
2. Maritime Orientation
  • Physical constraints
    • Physical geography increases the territorial exiguity.
    • An “empty” country:
      • 16% of the land is habitable.
      • Most of the population lives on 0.3% of the territory.
    • Fight against the scarcity of space:
      • Long narrow valleys.
      • Concentration of agricultural productivity.
      • Efficient management of existing agricultural land.
    • Kanto plain:
      • 30.5% of the population.
      • 8.3% of the surface of Japan.
      • 50% of the flat territory.

Hokkaido

Honshu

Kanto Plain

Nobi Plain

Yamato Plain

Shikoku

Kyushu

2 maritime orientation3
2. Maritime Orientation
  • Fishing
    • Insularity and fishing have influenced Japanese food supplies:
      • 25% of protein coming from fishes (6% world average).
      • Japan has the most important fishing fleet in the world.
      • Massive usage of aquaculture (shrimp, oysters, seaweed).
    • Fishing is favored by the meeting of two currents:
      • Kuroshio (warm and salty).
      • Oyashio (cold).
      • Enabling better plankton growing conditions.
  • Diet
    • Unique diet the outcome of geography.
    • Rice is the main staple food:
      • Soybean as a source of protein (tofu, shoyu).
      • Meat not part of the diet until 20th century.
2 maritime orientation4
2. Maritime Orientation
  • Climate
    • Japan is the meeting place of the important weather patterns.
    • Temperate.
    • Monsoons warm air masses from the south.
    • Siberian cold air masses from the north.
    • High precipitations.
  • Three major climate regions
    • North: temperate climate with cold winters and important snowfalls.
    • Center: east/west variation.
    • South: subtropical climate.

Oyashio

Cold

Cold winter winds

Hokkaido

Honshu

Shikoku

Kyushu

Kuroshio (Black current)

Warm and salty.

2 maritime orientation5
2. Maritime Orientation
  • Seismic activity
    • Meeting of 3 tectonic plates
    • Most active in the world.
    • 1,500 earthquakes a year (about 30 are felt).
    • Process of subduction.
  • Volcanic activity:
    • 10% of the world’s active volcanoes (200):
    • About 40 volcanoes are currently active.
    • Mount Sakurajima (Kyushu) erupted more than 5000 times since 1955.
    • Mount Fuji last erupted in 1707.
    • Numerous hot springs.

Eurasian Plate

2011 Sendai Earthquake

Pacific Plate

Philippines

Plate

2 maritime orientation6
2. Maritime Orientation
  • Earthquakes
    • Influence construction materials, construction techniques and lifestyle.
    • The 70 years rule:
      • Tokyo affected by a major earthquake every 70 years (1633, 1703, 1782, 1853, 1923).
    • Great Kanto earthquake (1923):
      • 8.3 MMS (moment magnitude scale).
      • 100,000 – 140,000 deaths.
    • Kobe 1995:
      • 6.8 MMS.
      • 6,400 deaths and 250,000 made homeless.
      • 30,000 damaged buildings.
      • Reconstruction costs: between 2 and 3% of GDP.
2 maritime orientation7
2. Maritime Orientation
  • 2011 Sendai earthquake and tsunami:
    • 9.0 MMS.
    • Largest in recorded history to hit Japan.
    • 4th largest in recorded history.
    • Triggered a 10 meters tsunami.
    • The island of Japan moved by 2.4 meters.
    • The earth axis shifted 10 centimeters.
    • 10,000 deaths (preliminary).
    • Problems with three nuclear reactors at Fukushima plant that were tested to withstand a 7.9 scale earthquake.
3 demography
3. Demography
  • Demographic and cultural homogeneity
    • 128 million.
    • 99% of the population is of Japanese ethnicity:
      • Some minorities which are discriminated against.
    • 99% of the population speaks Japanese.
    • Foster national identity and unity.
    • Issue of conformity.
    • “Yamato people” (plain around Kyoto).
    • Distrust of foreigners.
    • Literacy rate of 99%.
  • Immigration
    • Ethnic homogeneity does not favor immigration.
    • Would need 400,000 immigrants a year to stabilize population.
3 demography1
3. Demography
  • Aging
    • Population peaked at 128 millions.
    • Declined in 2005, for the first time since census was held (1899).
    • Highest life expectancy in the world:
      • 86 years for females.
      • 79 years for males.
      • More people over 65 than children under 15 (30,000 people more than 100 years).
    • Older age of marriage, around 27 years.
      • Many Japanese women do not marry (subservient relation).
      • Low fertility rate, about 1.3 children per woman.
    • Net decline of the active age population since 1997.
    • Decline in savings rate.
    • From net savers to net borrowers.
4 resources
4. Resources
  • Small resource base
    • Limited quantities of minerals and fossil fuels.
    • Japan needs to import most of its resources:
      • Favored the development of trade.
      • Industrial corporations and banks are controlling a significant array of foreign resources.
    • Small territory makes agricultural self sufficiency difficult:
      • One of the highest agricultural productivity.
      • 60% of all food is imported.
    • Issues:
      • Stability and reliability of partners.
      • Price fluctuations.
      • Must produce something in exchange.
4 resources1
4. Resources
  • Energy
    • Dependence on fossil fuels.
    • Hydroelectricity and geothermal energy have good potential.
    • Japan relies on nuclear energy.
    • Issue of energy security:
      • Imports 84% of its energy.
      • Diversify energy supplies notably from new regional producers (Indonesia, Brunei).
    • Nuclear facilities producing 25% of electricity needs.
b japanese development
B. Japanese Development

1. Feudal Japan (before 1868)

What characterized the Japanese society before its modernization?

2. Japan’s First Transformation (1868-1945)

How Japan was able to become an industrial power while most Pacific Asian countries failed?

3. Japan’s Second Transformation (1946-1989)

How Japan was able to become a global economic power?

4. The Lost Decades (1989-)

Why Japan has recently been facing economic difficulties?

1 feudal japan
1. Feudal Japan
  • Mythical origins
    • Japanese are descendants of the Sun Goddess Amaterasu (660 B.C.)
    • Major Kami (divinity) of Japan.
    • Mother of the first emperor (so divine origin).
    • The emperor: symbol of the people and the unity of the nation.
  • Archeological origins
    • Migration from the Korean peninsula around 400 B.C.
    • Brought rice culture from China.
    • Overthrown Ainu tribes present since the Neolithic era.
    • Fragmented country that took a long time to be unified (1603).

Yamato Plain

Core area

1 religions
1. Religions
  • Shintoism
    • “The Way of the Kami (Gods/divinity)”:
      • A combination of two Chinese words: Shin, meaning divinity, and Tao, meaning “the way” or “the path”.
      • Founded around 500 B.C.
      • Mixture of many tribal religions, each having had their own Kami, or god.
      • A Kami is anything that can be viewed with awe or reverence (natural objects or creatures); a physical and conceptual representation of a spirit.
    • Purpose:
      • Celebration and enrichment of life.
      • Sacredness of the whole universe and that man can be in tune with this sacredness.
      • Respect for the authority of the state, the employer, and the family.
    • Worship:
      • Act of purification; offering is presented to the kami, (money or food); and a prayer or petition is made.
1 feudal japan1
1. Feudal Japan
  • The Tokugawa era (1603-1868)
    • Brought stability and ended civil wars.
    • Unified Japan in a strong feudal system.
    • Strict partition of the society in social classes:
      • Samurai; warriors and administrators.
      • Peasant.
      • Craftsman.
      • Merchant.
    • Rise in the population and cultivated land.
    • Heavy taxes:
      • Peasants forced to give about 50% of the harvest to the landlord (Daimyos).
      • Wealth mainly measured by rice production.
1 feudal japan2
1. Feudal Japan
  • Isolation
    • Self-imposed isolation (until the 19th century).
      • Sakoku (closed country).
      • Ethnocentrism.
      • Xenophobia; travel abroad subject to death penalty.
      • Chauvinism.
    • Closed to foreign trade (1630-1854):
      • Trade allowed with China (Nagasaki) and the Netherlands (Deshima).
    • Christian religion implemented by Portuguese missionaries:
      • About 500,000 adherents.
      • Failed as 100,000 Christian Japanese were killed in 1612 by repression.
      • Felt as a tool of foreign control.
    • Very strict social and political regime with almost no mobility.
    • Isolation was seen as a way to maintain the regime.
1 feudal japan3
1. Feudal Japan
  • Feudal Economy
    • Power measured by rice production:
      • Rights to a share of the crops.
    • Large cities:
      • Edo (imperial capital that will become Tokyo)
      • Osaka (merchant city).
    • Powerful merchant families:
      • Such as in Europe, merchants were becoming powerful actors.
      • Large commercial houses such as Mitsui and Somitomo.
      • These houses will become Japanese conglomerates.
    • Several factors favorable to industrialization:
      • High urbanization: 16% by 1850.
      • Strong fiscal income.
      • Active internal trade.
      • High literacy (25%) of the population (40% for males).
      • Economic specialization of regions.
1 feudal japan4
1. Feudal Japan
  • The end of feudalism
    • Intervention of the United States in 1853 (Commodore Perry).
    • Increased European military presence in the region:
      • England just won the Opium War with China.
      • Considerable technological advance prevented Japanese opposition.
    • Unequal trade treaties signed (1858):
      • With the United States, Russia, Netherlands, England and France.
      • Unequal because if confers advantages only to one side (no reciprocity).
      • Commercial privileges, extra-territoriality for Western residents, presence of diplomatic representatives, low tariffs set by treaty, opening of new ports.
    • A sense of humiliation arose:
      • The Shogun was not able to rectify the situation.
      • Chinese proverb: “Change in dynasty occurs when there are interior problems and threats from the outside”.
2 japan s first transformation
2. Japan’s First Transformation
  • Context
    • End of the Tokugawa period (1603-1868):
      • Overthrowing the Shogun with a civil war.
      • Internal rebellion to change Japan in order to survive.
    • New emperor ended 250 years of military regency (1868):
      • Meiji stands for “enlightened government”.
      • From feudal to industrial society in less than 40 years.
  • Political reforms
    • Feudal system abolished:
      • Country divided in prefectures (1872).
      • Landlords no longer had power and became administrators.
    • The Samurai class disappeared:
      • Became government leaders, educators and businessmen.
      • Literacy rate of 90% in 1900.
    • Parliamentary monarchy formed (1889):
      • Conscription formed a civilian army.
      • Capital relocated from Kyoto to Tokyo; Easier access to the ocean.
2 japan s first transformation1
2. Japan’s First Transformation

LandRedistribution

Westernizethe SchoolSystem(Fr. & Ger.)

Abolitionof the Feudal System

ModernBankingSystem

Modernize the Army(Prussian)

MeijiReforms

WrittenConstitution(Germans)

Build aModern Navy(British)

Human Rights & ReligiousFreedom

EmperorWorshipIntensified

2 japan s first transformation2
2. Japan’s First Transformation
  • Indigenous modernization
    • Acquisition of western technologies and ideas:
      • “Japanese spirit, Western science”.
      • More than 3,000 foreigners invited to teach science, mathematics, technology, and foreign languages.
    • Urbanization, transport and communication:
      • Rail system (1872).
    • Market economy.
    • Formal schooling.
    • Also a few wrong ideas:
      • German theories of racial purity.
      • European rationale for colonialism (moral superiority).
      • Christian single deity: The Emperor.
2 japan s first transformation3
2. Japan’s First Transformation
  • Government / corporate dualism
    • The cession by the state of large industrial infrastructures.
    • Concentration of economic power in the hands of large conglomerates.
    • National achievements, private profits:
      • The creation of the military / industrial complex.
    • Zaibatsu (financial cliques) emerged:
      • Controlled by merchant families:
      • Mitsui (16th century).
      • Mitsubishi (1873).
      • Sumitomo (16th century)
      • Notable Japanese conglomerates that gained tremendous power during the Meiji era.
    • Supported the establishment of the emperor.
2 japan s first transformation4
2. Japan’s First Transformation
  • Territorial expansion and resources acquisition
    • Japan solved its problems by territorial expansion.
    • Limited raw materials and internal market.
    • Taiwan annexed (1879) after the Sino-Japanese war.
    • Victory in the Russo-Japanese war (1904-1905):
      • Korea annexed (1910).
      • Access to Manchuria (Port Arthur; Dalian).
    • Manchuria (1932):
      • Vast supplier of resources, especially minerals.
    • Vast weapon construction programs.
    • Transformation of colonies (Korea and Taiwan) to produce agricultural commodities needed in Japan.
2 japan s first transformation5
2. Japan’s First Transformation
  • Imperialist Japan
    • New Emperor, Hirohito (1926):
      • Showa period “enlighten peace”.
    • Government dominated by the military.
    • Japan as the dominant race of Asia.
    • Territorial expansion:
      • Government: Establish a political control zone in the Pacific zone.
      • Military: Reinforce Japanese power and prestige.
      • Zaibatsus: External markets for Japanese goods facing Western protectionism.
2 japan s first transformation6
2. Japan’s First Transformation
  • Territorial expansion during WWII
    • Look at the outside to solve internal problems.
    • War declared in 1941 against the Allies.
    • Initial successes in 1941-1942 gave to Japan a large economic sphere of influence.
    • Several new raw materials sources:
      • Indonesia: oil.
      • Malaysia: rubber and tin.
      • Lacking for the Japanese economy.
    • Access to a vast market and labor pool.
    • The industrial organization of conquered countries was done by the zaibatsu.
2 synopsis japan s first transformation
2. Synopsis: Japan’s First Transformation

Taiwan (1879)

Korea (1910)

Manchuria (1932)

Military

Technology assimilation

Isolationism

Feudal Japan

Imperial Japan

Expansion

Social stratification

Govt. / corp. dualism

Resources / Markets

Southeast Asia (1941)

Zaibatsus

United States (1853)

Unequal Treaties (1858)

Civil War (1868)

3 japan s second transformation
3. Japan’s Second Transformation
  • Defeat of 1945
    • Ended Japanese imperialism in Pacific Asia.
    • The Japanese economy was in shambles.
    • Territory:
      • Lost all its conquest of the last 60 years.
      • Parts of its national territory was occupied for the first time in history (American bases at Okinawa).
    • Casualties:
      • 7.1 million deaths.
      • 4 million workers of weapon industry were laid off.
      • 2.6 million people moved abroad (Korean and Chinese workers).
      • 1.2 million Japanese were repatriated (military personnel, administrators, traders, industrialists).
3 japan s second transformation1
3. Japan’s Second Transformation
  • Economic damage of WWII
    • Main cities (Kobe, Tokyo and Osaka) were destroyed over more than 50% of their surface.
    • Hiroshima and Nagasaki were a total loss.
    • 25% of housing was destroyed, 75% of oil refineries.
    • 90% of the merchant fleet and 30% of roads and railways.
    • The industrial capacity was at 60% of if 1935 level.
    • 13 million unemployed.
    • Material losses estimated at 25% of GDP.
3 japan s second transformation2
3. Japan’s Second Transformation
  • Marshall plan (1948)
    • The United States established an aid plan to help the Japanese economy recover.
    • Fear about instability promoting civil unrest.
    • About 2 billion dollars of aid:
      • Sony started with American financial help.
  • Political and Economic Changes
    • Political:
      • The emperor became again a symbol.
      • Adoption of a constitution similar to the United States.
      • No involvement in foreign wars permitted.
    • Economic:
      • Break-off of the Zaibatsus.
      • Advantageous parity of the yen (1 dollar for 360 yen).
3 japan s second transformation3
3. Japan’s Second Transformation
  • The Korean War (1950-1953)
    • Benefited the Japanese economy.
    • Japan served as a depot for the UN army:
      • Only allied country in the region.
    • Subcontracting to the American army:
      • More than 1 billion in contracts for the national industry.
      • Mazda started as a jeep manufacturer for the US army.
      • Related industries (energy, steel and chemistry) benefited.
    • Japan recovered its sovereignty (1951).
    • Several Zaibatsus reformed as Keiretsus (groups of bosses).
    • Mutual defense treaty signed with the United States (1954).
    • Growth was based by imitating western technologies and exports.
3 japan s second transformation4
3. Japan’s Second Transformation
  • 1) Geographical context of Japan
    • Paradox in itself.
    • Small-sized country (very little available space).
    • Average-sized population (126 millions).
    • Very limited array of resources.
    • “Creative pressure” perspectives:
      • Incitements at miniaturization.
  • 2) Promotion of exports
    • The world economy entered in a period of post-war expansion.
    • Important growth of international trade.
    • Japan entered the GATT (1955).
    • Development of the national market and of the promotion of exports.
3 japan s second transformation5
3. Japan’s Second Transformation
  • 3) Labor
    • Good labor relations in the Japanese economy:
      • Post war hardships.
      • Good management.
      • A consensus was reached in the early 1950s.
      • Strikes are virtually unheard of.
    • Highly skilled, disciplined and trained.
    • Continuous improvement in qualifications, part of the corporate experience.
    • Longer weeks, weekdays and more overtime.
    • More willing to avoid conspicuous consumption.
    • Less space (housing) for the accumulation of consumption goods.
3 japan s second transformation6
3. Japan’s Second Transformation
  • 4) Technology
    • Imports, notably from the United States.
    • Licensing, patent purchases, and imitation and improvement.
    • Imitation of successful technologies.
    • Japan then became an innovator (1980s).
  • 5) Consumption and wages
    • Internal demand growth because wages were growing faster than inflation but less than productivity growth.
    • Fast adoption by the market:
      • Preferences on national products.
      • Short product life cycle.
      • Exports can occur over economies of scale.
    • Spread the gains in the society.
3 japan s second transformation7
3. Japan’s Second Transformation
  • 6) Investments
    • Done in productive forces instead of consumption.
    • High technology and heavy capital investment:
      • 20% of GDP.
      • Steel, petrochemicals, cameras, televisions, motorcycles and automobiles.
    • Saving rates:
      • Between 15 and 25% of income compared to less than 3% in the United States.
      • 13% of GPD in 1970 as opposed to 6% for the United States
      • Policies to favor savings, unlike borrowing for the US.
      • Decline in savings due to aging of the population.
    • The government provided financial assistance to banks and invested in infrastructures such as road and railways.
    • Investment needs came from 90% of national capital:
      • No vulnerability to currency fluctuations.
3 japan s second transformation8
3. Japan’s Second Transformation
  • 7) Educational system
    • Longer schooling year.
    • Very competitive system.
    • High level of discipline.
    • Emphasis of technical issues.
  • 8) Military expenses
    • Much smaller than most countries.
    • Security guaranteed by the United States.
    • Japan has however a significant defense force.
    • Resources can be allocated elsewhere.
3 japan s second transformation9
3. Japan’s Second Transformation
  • 9) The role of corporations (Keiretsus)
    • High level of loyalty to corporations and other institutions.
    • Cradle to grave employment:
      • Once graduated from school, a person\'s position with a corporation may last for life.
      • Corporations often provide housing, recreational opportunities, vacation travel, and, sometimes, even marriage opportunities.
    • Japanese corporate strategies:
      • Coordination of investments, production and exports.
      • Unwillingness to buy from abroad even when the price is lower.
      • Spends a great deal on research and development to keep at the cutting edge of new technologies.
      • Corporations somewhat replaced the government for foreign policies.
3 japan s second transformation10
3. Japan’s Second Transformation
  • 10) Adaptation and ambivalence
    • Tradition since the Meiji restoration.
    • Able to borrow ideas and technologies and incorporate them into the society.
    • Celebration of Christian holidays, such as Christmas.
    • Favorite drinks are Sake and Scotch.
    • Favorite sports and Sumo wrestling and golf.
3 synopsis japan s second transformation
3. Synopsis: Japan’s Second Transformation

Imports

Government

Geography

WWII

Corporate Japan

Trade

Labor / Education

Keiretsus

Exports

Technology

Investments

Added Value

Military occupation

Political changes

Economic changes

4 the lost decades 1989
4. The Lost Decades (1989-)
  • The “Bubble Economy”
    • Period of fast growth in the late 1980s.
    • High confidence and high expectations.
    • Evaluation of the yen after 1985 (3 times its 1971 value).
    • Asset prices inflation (stock and real estate):
      • Real estate as the guarantee to borrow for stock market investment.
      • Peak of the bubble (1990); Japanese real-estate was worth four times the value of all property in the US.
    • Unsustainable process.
4 the lost decades 19891
4. The Lost Decades (1989-)
  • Factors
    • Speculation:
      • Real estate and stock market.
      • Growth expectations and risk taking.
      • Many loans could not be paid back.
    • Relocation of several factories to cheap labor nations:
      • 15% of the manufacturing of Japanese corporations is done abroad.
      • The high value of yen favors imports more than exports.
      • China, Vietnam, the Philippines, etc.
      • Competing directly with Japan.
      • Relocation to Mexico, Canada and the USA (NAFTA).
    • High production costs:
      • Undermines international competition.
      • Difficulties to adapt to the information society.
    • Opening of the internal market to foreign competition:
      • Its trading partners were asking for a more opened Japanese market.
4 the lost decades 19892
4. The Lost Decades (1989-)
  • Economic and financial crisis
    • Began in the 1990s; a period of stagnation.
    • In 1990, the Nikkei lost 38% of its value (2 trillion $US).
  • Consequences
    • Since 1991, 2.5 million manufacturing jobs have disappeared (25% decline).
    • Mergers and acquisitions in the banking sector.
    • The keiretsus are now less dominant as independent entities.
    • 1990s labeled as “Japan’s lost decade”.
    • Crony capitalism with “too big to fail” corporations.
c the corporate and industrial hegemony
C. The Corporate and Industrial Hegemony

1. Corporate System

What is the nature and structure of the Japanese corporate system?

2. Labor and Technology

What is specific to the Japanese workforce?

3. Trade and the Financial System

What is the commercial and financial strength of Japan?

4. Mega-Urban Regions: Tokaido

How Japanese urbanization is structured?

1 corporate system
1. Corporate System
  • Political Economy
    • Government / keiretsus dualism.
    • Economic power is concentrated in a limited number of corporations.
    • More the case in Japan than any other parts of the world.
    • Corporatism and society:
      • Difficult to separate the corporation and the society as they are embedded.
      • Corporations are part of important economic and political decisions in Japan.
      • Dualism between the government and the corporations.

BOJ

Government

MOF

METI

Keiretsus

1 corporate system1
1. Corporate System
  • The Keiretsu
    • “Group of leaders”.
    • Complex structure of more or less linked corporations.
    • Vertically and horizontally organized.
    • Six main horizontal conglomerates (keiretsu):
      • Mitsubishi.
      • Mitsui.
      • Sumitomo.
      • Fuyo.
      • Dai-Ichi Kangyo (DKB).
      • Sanwa.
    • The first five conglomerates account for about 25% of the Japanese GDP.
1 corporate system2
1. Corporate System
  • Horizontal keiretsu
    • Highly diversified function.
    • A “trinity” or core:
      • A bank at the core.
      • A trading company: conducting trade on behalf of the group.
      • A manufacturer or heavy industry.
    • Cluster of affiliates and subsidiaries:
      • From related and unrelated industries and services.
      • Major manufacturers.
      • Large service providers like life insurance companies.
      • 2-6% equity ownership.
      • Prevents takeovers.
    • Interlocking directorates:
      • Leaders meeting to discuss strategy.

Bank

Trading

Company

Manufacturer

Affiliates and subsidiaries

1 corporate system3
1. Corporate System
  • Vertical keiretsu
    • Centered around a major manufacturer that is often part of an horizontal keiretsu.
    • Consist primarily of suppliers and distributors relationships.
    • Service the large manufacturer at the core of the keiretsu.
    • The Automobile Industry:
      • Toyota Group, Nissan Group, Honda Group, Daihatsu Motors, Isuzu.
    • Electronics:
      • Hitachi, Toshiba, Sanyo, Matsushita, Sony.

Suppliers

Manufacturer

Wholesaler

Retailers

1 corporate system4
1. Corporate System
  • Advantages
    • Specialization and economies of scale.
    • Stable linkages.
    • Privileged customers.
    • Reciprocal monitoring.
    • Sharing market and R&D information.
    • Access to financing.
    • Low contestability from new entrants.
  • Drawbacks
    • Complex structure.
    • Imposed partnerships and customers.
    • Low performance incentives.
    • Difficult to share information with outside firms.
    • Low responsiveness to market changes.
2 labor and technology
2. Labor and Technology
  • Research, Development and Labor
    • Technology is of strategic importance to increase productivity:
      • About 3.6% of the GDP as compared to 2.5% for the United States.
      • 25,000 patents per year compared with 50,000 for the United States.
    • Priority to scientific and technological research:
      • 110 scientists and technicians per 1,000 people.
      • Only 55 per 1,000 in the U.S.
      • Much of this research is funded by the private sector, usually by the industry, rather than by the government.
      • Far more emphasis placed on applied research than on basic research.
      • Must generate income for the corporation.
labor and technology
Labor and Technology
  • Lower unemployed rate than many other economies
    • 2 to 3% unemployment rate on average.
    • Hides underemployment problems.
    • Massive sub-contracting to absorb market fluctuations.
    • Women labor absorbs most of the fluctuations.
    • Strict employment hierarchy.
    • Secure employment for large corporations
2 labor and technology1
2. Labor and Technology
  • Lifetime Employment System
    • A company guarantees its new employees a job until retirement.
    • Recruitment takes place directly after education:
      • Training is provided on the job.
      • May take a few years for the employee to become productive.
    • Most characteristic of large firms and government agencies.
    • About one-third of the workforce:
      • Workers called “salaryman”.
    • Raises:
      • Mainly a function of seniority.
      • Usually given to a whole level or group at the same time.
      • Especially at the lower ranks where there are more employees and less distinction between them.
2 labor and technology2
2. Labor and Technology
    • Flexibility:
      • Strict prohibitions against firing except under extreme circumstances.
      • Recessions; across-the-board salary cuts rather than downsizing.
    • Quitting:
      • A company is seen as a family and close relationships of trust must be built with co-workers.
      • Disgrace and dishonor to quit a company.
      • “Letting down” or “betraying” the family.
  • Labor changes
    • The rise of temporary workers.
    • New law (2004) authorizing less benefits for temporary workers.
    • 1/3 of the workforce.
    • Benefit: less demanding than a full time job.
    • Drawback: quick to be laid off during a recession.
2 labor and technology3
2. Labor and Technology
  • Automation
    • The Japanese economy relies heavily on mechanization.
    • Accumulation of equipment goods.
    • Main reasons:
      • Save costs (high Japanese labor costs).
      • Increase productivity.
      • Raise quality (commitment to total quality; Kaizen system).
      • Remain competitive in a global market.
      • Transfer dangerous and laborious work.
    • 40% of all industrial robots were in Japan (2007).
    • Mostly in the automotive sector.
    • Limits to robotisation.
    • Sony investing massively in robots as consumer goods:
      • AIBO (dog); most sophisticated consumer robot to date.
      • ASIMO and QRIO (small humanoid).
3 trade and the financial system
3. Trade and the Financial System
  • International trade
    • Very important for Japan:
      • Japan is the 4th largest trader in the world (supplanted by China in 2004).
      • Fills the needs of the Japanese economy in raw materials and energy.
    • Trade system:
      • Import raw materials and parts.
      • Perform value added activities (notably technology related).
      • Export at competitive prices.
      • Cars and electronics are the two key main exports.
    • Systematic positive trade balance of Japan.
    • Increasing importance of the national market and relocation of some industries abroad.
    • Japanese economy increasingly linked with the Chinese economy.
japan s trading partners
Japan’s Trading Partners

Coal, Iron ore, Grain

Market

Offshoring

Market

Oil

LNG, Lumber

Coal, Iron ore, Grain

4 tokaido
4. Tokaido
  • Tokaido
    • Imperial road that linked Edo (Tokyo) to Kyoto.
    • Urban region accounting for more than 90 million people, 70% of the Japanese population.
      • Tokyo: 31 million population.
      • Nagoya and Osaka (9 and 16 million population).
      • Several cities are over 1 million (Kobe, Kyoto and Yokohama).
4 tokaido1
4. Tokaido
  • Functions and specialization of Tokaido
    • Tokyo:
      • Tertiary and quaternary functions.
      • 70% of wholesaling, finance and insurance.
      • Head offices of several conglomerates.
      • 1990: between 45 and 50% of the global financial capitalization.
    • Nagoya and Osaka:
      • Industrial, financial and port centers.
    • Massive accumulation of multimodal transport infrastructures.
    • Support the external dependency of Japan.
    • Several large airports supporting the trading and financial network.
  • Shinkansen
    • High-speed train network.
    • Opened in 1964.
    • Operates at speeds of more than 200 km/hr.
    • 300 km/hr trains are now entering in service.
the shinkansen high speed rail network
The Shinkansen High Speed Rail Network

Operational

Under Construction

Hokkaido

Planned

Sapporo

Hakodate

Aomori

Hachinohe

Akita

Morioka

Shinjo

Yamagata

Sendai

Niigita

Fukushima

Nagano

Takasaki

Kanazawa

Omiya

Honshu

Tokyo

Nagoya

Okayama

Shimonoseki

Osaka

Shikoku

Fukowa

Nagasaki

Kyushu

kagoshima

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