Firms and Industrial Organization in Japan

316 Pages·1996·32.818 MB·English

by  Yoshiro Miwa (auth.)

FIRMS AND INDUSTRIAL ORGANIZATION IN JAPAN

Firms and Industrial
Organization in Japan
Yoshiro Miwa
Professor of Economics
University of Tokyo
© Yoshiro Miwa 1996
Softcover reprint of the hardcover 1st edition 1996 978-0-333-62130-1
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First published 1996 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives
throughout the world
ISBN 978-1-349-39304-6 ISBN 978-0-230-37146-0 (eBook)
DOI 10.1057/9780230371460
A catalogue record for this book is available
from the British Library.
10 9 8 7 6 5 4 3 2
05 04 03 02 01 00 99 98 97
Transferred to digital printing 2002
Contents
List of Figures and Tables vii
Preface and Acknowledgements ix
2 Introduction and Summary 2
PART I SMALL BUSINESS AND DIVISION OF LABOUR
2 Monopoly, Corporate Profits and the Dual Structure 33
3 The Image and Reality of Small Business and Small
Business Policies 41
4 Supplier-Assembler Relationships in the Motor Industry 58
PART II FINANCIAL MARKET
5 Economic Analysis of the 'Loan-Concentration' Mechanism 83
6 Main Bank and its Functions 100
7 An Anatomy and Critique of the Corporate-Group View 123
PART III INDUSTRIAL POLICY
8 Industrial Policy of Japan: A Beginner's Guide 145
9 Economic Consequences of Investment Coordination in the
Steel Industry I 57
10 Coordination within Industry: Output, Price and Investment 177
PART IV INTRA-FIRM ORGANIZATION AND
INTER-FIRM RELATIONSHIPS
11 Corporate Governance in Japanese Firms: The Body of
Employees as the Controlling Group and Friendly
Shareholders 195
12 Inter-firm Relationships 217
Conclusion 236
JVotes 239
References 290
Index 302
v

List of Figures and Tables
Figures
1.1 Total and per capita Gross National Expenditure (GNE) at
current prices in 1934-6 7
2.1 Rate of profit on equity (paid-in capital) of corporate
enterprises in Japan, before tax, all industries 37
3.1 Three images of small business 43
5.1 The equity-total capitalization ratio, 1960-74 87
9.1 Forecasts and results of steel production, FY1965-FY1970,
in raw steel base 169
Tables
l.l GDP at current prices in Group 7 countries 4
1.2 Per capita GDP in Group 7 countries 4
1.3 Real GNP growth rate in Japan, 1945-80 4
1.4 Export component ratios of Japan, 1900-1990 5
1.5 Production of selected goods, 1935-53 6
1.6 Japanese car production and exports 8
1.7 A comparison of size of large firms: American, European and
Japanese lO
2.1 Rate of profit on equity (paid-in capital) of corporate
enterprises in Japan, before tax, all industries 38
2.2 Rate of profit on equity (paid-in capital) of corporate
enterprises in Japan, after tax, all industries 38
2.3 Rate of profit on equity (paid-in capital) of corporate
enterprises in Japan, before tax, manufacturing 39
3.1 Number of establishments by employee size, private,
non-agriculture 50
3.2 Number of establishments by employee size, private,
manufacturing 51
4.1 Specialization structure in the motor industry, number of
suppliers: the case of Toyota 65
4.2 Support from an assembler 69
5.1 Loan shares of financial institutions 86
5.2 Success ratio of small business's borrowing proposals 93
5.3 Comparison of achieved and desired external funding, size in
paid-in capital 96
5.4 Change in loan attitude of core banks, size in paid-in capital 98
5.5 Reason for postponing equipment order, size in paid-in
capital 99
6.1 Sales growth rate and core bank stability, 1973-83 102
VII
viii List of Figures and Tables
6.2 Indices of core bank stability, 1973-83 103
6.3 Six major corporate groups and indices of core bank stability
(1), 1973-83 105
6.4 Six major corporate groups and indices of core bank stability
(2), 1973-83 106
6.5 Main bank loan share: general trading companies 112
6.6 Main bank loan share: real estate companies 112
6.7 Total loans and loan share: the case of Eidai Industries 114
6.8 Stability of relationship between core bank and risky
borrower, 1973-84 117
6.9 Direction of change in main bank's loan share (number of
firms): risky borrowers (1}, 1973-84 118
6.10 Direction of change in main bank's loan share (number of
firms): risky borrowers (2) 1983-4 118
6.11 Direction of change in main bank's loan share (number of
firms): risky borrowers (3}, 1973-84 119
6.12 Direction of change in main bank's loan share (number of
firms): risky borrowers (4}, 1973-84 119
7.1 Presidents' meeting of six major corporate groups 127
7.2 The six major corporate groups' position in the Japanese
economy, excluding banks and insurance companies 128
9.1 Steel production in the forecasts for each year's coordination
and the results, FY1961-FY1966, in raw steel base 168
9.2 Ratio of the result of steel production to the forecast:
performance in the third year 168
9.3 Each firm's relative market share among major steel
producers, in raw steel base 175
Preface and
Acknowledgements
I wrote this book primarily for two groups of people. One group consists of
those scholars and students interested in industrial organization and
economic theory, including the theory of the firm and the market. The
other group are the comparativists interested in Japan. Unlike most books on
the Japanese economy, this volume argues that nothing is peculiar to Japan.
Many argue that Japan is different, and there exists a huge collection of
stylized facts about the Japanese economy. However, most of these alleged
facts are either non-existent or based on shaky ground.
For a long time Japan has been in a world of exchange by agreement rather
than by coercion, where the costs and benefits of agreement determine its
scope. It is my purpose to demonstrate that the standard principles of
economics explain the dominant patterns of Japanese economic phenomena.
The principles are not those anyone invented to explain Japan. Indeed, they
were not invented to explain any particular society. This is my central point. I
argue below that the essence of the underlying mechanism of the Japanese
economy closely resembles the essence of the underlying mechanism in most
other economies. I wish to deal only with Japan, and only with the basic
contours of firm behaviour and the function of markets. That I consider
challenge enough. Readers are not expected to have much or any knowledge
of Japan, particularly the stylized facts and anecdotes about the Japanese
economy. However, a basic knowledge of economics and a strong dose of
logic, even in the flood of strange tales and anecdotes, is required.
In the process of writing this volume, I have incurred a large intellectual
debt to many senior scholars, mostly Japanese, upon whose pathbreaking
work I draw heavily and some of whom are still entirely against my
arguments. The citations should make this debt clear, but lest there be any
doubt I gladly acknowledge their contribution. In alphabetical order, with (as
we shall do throughout the book) given names first and family names last,
they are: Ken'ichi Imai, Keimei Kaizuka, Tadao Kiyonari, Kazuo Koike,
Ryutaro Komiya, Yutaka Kosai, Yoshikazu Miyazaki, Hideichiro Naka
mura, Takafusa Nakamura, Kohnosuke Odaka, Yoshio Sato, Mikio Sumiya,
Toshimasa Tsuruta, Masu Uekusa, and Kozo Yamamura.
Much of this book (Part I to Part III) is based on my Japanese book, Nihon
no Kigyo to Sangyo Soshiki (Firms and Industrial Organization in Japan),
published in 1990 by the University of Tokyo Press (Miwa 1990a).1 That
book is a collection of academic papers each of which challenged many
aspects of what I call below the conventional view of the Japanese economy.
A long time has passed since the first paper was published in 1977. Over
that period many friends at many institutions, besides some of the senior
scholars cited above, shared their ideas with me, both in conversation and
ix