The Multinational Monitor



The Ties That Bind

Descended from family business empires, six huge business groups dominate the Japanese economy

Behind all the talk of industrial policy, protectionism, unfair trade practices, insufficient defense spending-and the many other complaints that American businessmen voice about their number one rival-lies a simple fact: Japan is above all a capitalist economy, powered by one of the highest concentrations of economic power the world has ever known.

This third largest economy in the world is dominated by 13 groups: six zaibatsu (literally, financial cliques) and seven konzerns (large, integrated industrial companies). Dating back to the early days of Japanese industrialization, most of these groups have become familiar names around the world. Among them are Mitsubishi, Mitsui, and Sumitomo, which together with the lesser-known Fuyo Group, the Dai-lchi Kangyo Group, and the Sanwa Group make up the six zaibatsu, the main organizers of Japanese industry, commerce, and finance. The seven industrial firms - Nippon Steel, ToshibaIHI, Hitachi, Toyota, Nissan, Matsushita, and Tokyu-complete the ruling circle.

If the six zaibatsu were listed as single corporations, they would represent the six largest multinationals in the world-larger than Exxon, Shell Oil, or General Motors (see table ). Organized around banks and involved in the production of nearly everything from steel, to electronics, to ships, to consumer goods, to sugar, the zaibatsu operate as single entities, coordinating investments, sales, and production through a system of centralized control characterized by formal monthly planning meetings by top executives of group companies.

Zaibatsu is the Japanese version of the financial-industrial group, a form of industrial organization that exists in all the leading capitalist countries.

In the late 1800's the Imperial Japanese government took the lead in promoting the growth of industrial monopolies, and later turned them over to private interests. As a result, large concentrations of economic power were created within a feudal hierarchy, with strong ties to the state. By the late 1920s, four major financial/industrial empires, plus ten lesser combines had risen, each controlled by a single family. The big four - Mitsui, Iwasaki (now Mitsubishi), Sumitomo, and Yasuda - had commanding power in the economy and together accounted for more than 75 percent of all bank loans and owned almost 25 percent of the paid up capital in Japan.

The prewar zaibatsu were organized somewhat differently than their modernday counterparts. Each group was controlled through a central holding company, or honsha, in which the zaibatsu family owned a majority of the stock. The honsha in turn held controlling interest in the major firms in the group.

One of the primary objectives of the U.S. Occupation forces in Japan after World War 11 was the breakup of the zaibatsu, which were rightly seen as the prime movers behind Japanese imperialism. By 1947, the family holding companies had been abolished, and zaibatsu family members and former top managers prohibited from future participation in management. Major companies, such as the trading firms of Mitsui and Mitsubishi, Japan Iron and Steel Company, the giant Oji Paper Company, and Mitsubishi Heavy Industries, were broker) up.

But by 1948, the anti-monopoly policies of the U.S. occupation had changed; Japan was now seen as an important ally in the struggle against social revolution and the rebuilding of the Japanese economy came to be a major objective of U.S. policy. In practical terms this meant the revival of the zaibatsu, with banks rather than holding companies at the center. In the next twenty years, the zaibatsu were rebuilt into approximately what they are today.

The zaibatsu differ in three important ways from their counterparts in the U.S. First, while U.S. groups (such as the Mellon Bank-Gulf Oil-U.S. Steel "zaibatsu") tend to be loosely organized, zaibatsu are characterized by central control and coordination. Second, group control in Japan stems largely from the power of the big lender rather than the big stockholder. Loans make up 70 to 80 percent of the average Japanese corporation's value while in the U.S., loans rarely make up more than 30 percent. Third, Japanese general trading companies (soga shosha) play a central role in organizing trade and overseas investments of the zaibatsu.

Critics of the Japanese economic policies tend to focus on the role of government agencies, such as the Ministry of International Trade and Industry (MITI), in setting trade and investment policies. While the government does play a key role in granting special incentives (such as the funding of research and development), it does not actually choose sectors for growth. Instead, it relies on industry views as expressed through such bodies as Keidanren (see accompanying article). Once an agreement is reached, the group companies can then easily shift financial and industrial resources into the new sector. Quite often in the past, MITI views (such as its recommendation in the 1960s not to export automobiles) have been rejected. But when they are accepted, the joint collaboration between the state and industry is quite powerful-as many American firms have learned.

The group structure in Japan also has bred intense, often devastating competition. Five companies, for example, control 72 percent of steel production, 92 percent of the auto industry, 96 percent of the production of desk calculators, 82 percent of television production, 100 percent of the beer market, and 100 percent of the toothpaste market. In the withering competition, many small businesses are left behind.

In recent years, Japanese companies have been moving more and more into high technology areas: computers, biotechnology, advanced electronics, specialty steels, telecommunications, etc. With the buildup of Japan's military, heavy industrial firms have also been increasing their investments in defense production.

Although the largest share of Japanese foreign investment is in Asia (35 percent of its accumulated investment), the U.S. is the largest single recipient of Japanese investment, accounting for nearly 25 percent. Total Japanese investment overseas at the end of 1982 was $53.1 billion.


The largest and most powerful of the zaibatsu groups, Mitsubishi is centered around three companies: Mitsubishi Bank, Mitsubishi Shoji (trading), and Mitsubishi Heavy Industries. The group leads in practically every sector of Japan's economy, including glass, beer (Kirin is one of its most famous trademarks), petrochemicals, petroleum, shipping, and trust banking. Mitsubishi holds a monopoly position in Japan's defense industry, and is extremely influential in government circles.

The group has been one of the most active in making ties with U.S. multinationals: of the top companies in the group, seven have significant foreign ownership. Mitsubishi's primary, foreign partners are Westinghouse Electric, Caterpillar Tractor, Monsanto, Hoeschst Chemicals, and Getty Oil. Its joint venture with Reynolds Industries in Kentucky Fried Chicken operates 30 percent of the overseas shops of this well-known chain. In 1971, Mitsubishi Motors was the first Japanese auto company to set up a joint venture with an American firm when it struck a deal with Chrysler.


Once the most powerful zaibatsu in Japan, the Mitsui group was considerably weakened after World War IL Unlike Mitsubishi and Sumitomo, Mitsui was unsuccessful in reuniting its group companies, largely because its leading bank was the only big Japanese bank forced to undergo major reforms. (Four of its former companies are now powerful corporations in their own right: Toshiba Electric, Ishikawajima-Harima Heavy Industries (IHI), Kanebo, and Toyota Motors). As a result, Mitsui is weaker than its two rivals in heavy industries and financial power.

Mitsui companies lead, however in the fields of synthetic textiles, sugar, coal mining, and photographic supplies. Mitsui's trading company is the second largest in Japan and one of Japan's largest foreign investors. Major foreign investors in Mitsui group companies include Du Pont, Kimberly-Clark, Continental Carbon, Dow Corning, Mobil, Exxon, and Sperry Rand.


This tight-knit group has traditionally been centered in the mining and manufacturing industries and has come to rival Mitsubishi as an industrial power. The top three leaders of the group are Sumitomo Chemical, Sumitomo Bank (the country's third largest commercial bank), and Sumitomo Metals Industry. Sumitomo's Nippon Electric Company (NEC) is one of the world's leading telecommunications firms. The group leads in chemicals, aluminum, and nickel production. Sumitomo has less foreign capital ties than Mitsubishi, but has had a long relationship with both ITT and AT&T. Among its major foreign investors are Upjohn Corporation, Minnesota Mining and Manufacturing (3M), GTE, and Ford Motor Company (which has a capital tieup with Toyo Kogyo, a group member). It is closely allied with Matsushita Electrical Company and Komatsu, the world's leading construction equipment producer. Sumitomo is also heavily involved in defense-related production. But its most famous product may be its beer Asahi.

Fuyo Group

Lesser known and more loosely organized than the big three, the Fuyo group is the successor to the prewar Yasuda zaibatsu and is organized around the Fuji Bank, Japan's second largest financial institution. Among its group companies are Nippon Kokkan or NKK, Japan's second largest steel maker, Oki Electric Corporation, Canon, and Sharp Corporation. It also is linked with Nissan Motors and the Marubeni Trading Company. Among the largest investors in the Fuyo group are Scott Paper, Union Carbide, Mobil Oil, and Raytheon. Fuyo group members have particularly close ties with the Japanese government, and are some of the largest political contributors in Japan.

Dai-ichi Kangyo Bank Group

Relatively new as a group, the Dai-ichi Kangyo Bank group, better known as DKB, was built around the merger of two banks in 1971. Now the largest commercial bank in Japan, DKB is closely allied with C. Itoh and Company, the country's third largest trading company. Through its control of Kawasaki Heavy Industries, Kawasaki Steel, and Niigata Engineering, the DKB group has become a leading force in manufacturing and a major defense contractor. Key companies in the DKB group have close ties with foreign capital. Some of these links include Fuji Electric/Siemens, Furukawa Electric/Alcoa, Nippon Light Metals/Alcan Aluminum, and Yokohama Rubber/ B.F. Goodrich. It also has a strong position in food products, partly through its ties with Oscar Meyer and Borden.

Sanwa Group

Smallest of the big six, the Sanwa group is relatively weak in manufacturing and heavy industries. But it is strong in banking, insurance, textiles, and construction. Sanwa is also closely related to Hitachi and Kobe Steel, one of the big five steel producers. Major foreign partners include Borg Warner and Firestone Tire and Rubber.

The seven konzerns

The konzern (a German word) is a group of mainly non-financial companies characterized by integrated operations, usually within a single industry or several related industries. Unlike the zaibatsu, konzerns usually do not have a bank or other central financial institution within their fold, and must look outside for the bulk of their capital needs. Two examples of non-Japanese konzerns are the Oakland, California-based Kaiser group of companies, and the Krupp Konzern of West Germany.

The seven konzerns in Japan are: Nippon Steel, the world's largest steel company and a major foreign investor; the Hitachi Group, which is centered around the largest integrated electric machinery manufacturer in Japan; Nissan Motor Company; Toyota Motor Company; the Matsushita Group, better known for its brand names National and Panasonic; the Tokyu Corporation, which owns one of the largest private railways in Japan; and the Toshiba-IHI group, whose largest shareholder is General Electric.

Though normally engaged in stiff competition with each other, the 13 Japanese industrial groups sometimes form joint ventures when the amount of capital involved is too great for one group or corporation to raise. These ventures have mostly been in new industries, such as atomic power, computer and information services, ocean and oil development, and urban development. For example, Toshiba and IHI, together with several Mitsui group companies, formed Nippon Atomic Industry Group Company, one of the major nuclear companies in Japan; and the Nippon Steel Company and Hitachi Electrical Company have joined with the Industrial Bank of Japan to form Japan Development Company.

Most of the information in this article is condensed from the 1972 Handbook of Japanese Financial/Industrial Combines, a special issue of the Pacific Imperialism Notebook produced by the Pacific Rim Project of San Francisco, California (unfortunately no longer in print). Other sources include the Japan Economic Journal, Industrial Groupings in Japan, and World Trade War, by Jon Woronoff.

The Best Seller List

Japan's Leading Corporations

Company Affilliation Industry 1982 Sales, $Billions
Nissan Fuyo Cars 16.5
Hitachi Fuyo Electronics, appliances, office equipment 16.3
Toyota Misui, Tokai Cars 15.6
Matsushita Electrical Independent Electronics, appliances 14.9
Nippon Steel Independent Metals, steel 14.4
Mitsubishi Heavy Industries Mitsubishi Motor vehicles, industrial equipment 13.2
Idemitsu Kosan Tokai Petroleum 12.3
Toshiba Mitsui Electronics, appliances, office equipment 10.2
Honda Mitsubishi Motor vehicles and parts 8.3
Maruzen Oil Sanwa Petroleum 7.4

Sources: Fourtune International 500 (August 22, 1983); Industrial Groupings in Japan (Dodwell Marketing Consultants, 1980).

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