In Brief
Keiretsu are networks of Japanese business conglomerates characterized by mutual support, interlocking shareholdings, and a central main bank, fostering financial stability and long-term planning among member companies.
While they offer advantages like stability and collaboration, they face criticisms for reducing competition and flexibility.
Despite these criticisms, keiretsu remain influential in modern Japan, adapting to global trends and significantly impacting international trade.
Ever thought about how Japan bounced back after World War II and became such a strong economy? The trick is something called keiretsu. It’s like a network of companies that work together closely, almost like family.
The Birth of Keiretsu
Keiretsu actually started after World War II. When the U.S. took apart Japan’s big family-run monopolies, the zaibatsu, Japanese firms got smart and began to connect with one another by forming these networks.
This wasn’t just a smart strategy—it turned out to be a game changer, fueling what people call an “Economic Miracle” for Japan.
How Keiretsu Works
Think of keiretsu as a kind of business teamwork. Companies share a small piece of each other’s stocks, creating bonds of support and safety among them.
At the center of it, there’s usually a strong bank that acts like a family leader. This bank helps the member companies with funding and guidance.
Types of Keiretsu Networks
Horizontal Keiretsu
This type spans different industries, kind of like a big extended family of businesses. For example, a major bank might lead a group of 20 to 30 companies across various fields—from food to electronics to pharmaceuticals.
Vertical Keiretsu
Now, picture a pyramid where a top manufacturer stands proud. Toyota is a great example; it leads multiple layers of suppliers and subsidiaries. Each business in the chain holds shares in others below it, creating a tightly-knit supply network.
The Modern Evolution
Today, we see some big shifts in how keiretsu works. The amount of cross-shareholding dropped below 10% in 2017 for the first time ever.
This change reflects Japan’s shift toward modern corporate governance and how they’re responding to pressure from foreign investors.
The keiretsu system has really given Japanese companies the financial power needed to compete on the world stage. You can see its impact in how these businesses focus more on long-term growth instead of just chasing quick profits. This strategy has played a big part in Japan’s success after the war.
