JSP156 / LS173

Japanese Business Management & Labor Strategic Issues in Doing Business in Japan

THE JAPANESE BUSINESS ENVIRONMENT

REAL ESTATE COSTS IN JAPAN

Some figures:

• Ginza: US$23,000 per square foot!

• Chiyoda-ku: US$81,165 per square foot!!

• Tokyo alone is more expensive than all of the United States!

• At one point, Japan was 4X more expensive than the U.S.!

REAL ESTATE COSTS IN JAPAN

URBAN LAND PRICE INDEX

REAL ESTATE & SHARE PRICES

MULTI-LAYER DISTRIBUTION & REGIONAL DIFFERENCES

CONBINI

• POS TERMINALS• SEASONAL PRODUCT LINES• LONG STORE HOURS• CONVENIENT PAYMENT OF BILLS

D.M.: MAIL ORDER BUSINESS

Y 2,200,000,000,000 INDUSTRY:• CLOTHING (40%)• FURNITURE, APPLIANCES, OTHER

HOUSEHOLD (16%)• PERSONAL GOODS & SERVICES (44%)

REGIONAL DIFFERENCES

LEGAL SYSTEM

• Less than 11,000 lawyers in Japan (vs. >500,000 lawyers in US) Government of Japan is the largest “law firm” in the world

• Product liability: 15 yr. period: 130 suits (vs. 13,595 suits in the U.S. in one year) must prove intent

• Koban (“police box”) system

• Organized crime (83,600 boryokudan members) 6,300 extortion companies (sokaiya)

Country Homicides Thefts

JAPAN 1.2 / 100,000 1,414 / yr.

GERMANY 3.5 / 100,000 4,051 / yr.

U.S.A. 6.3 / 100,000 4,049 / yr.

YAKUZA

ENVIRONMENTAL ISSUES

TOXIC PLUTONIUM

O-BENTO & O-HASHI

SODAI GOMI (DEBRIS)

NAGASAKI DOLPHINS

JAPANESE CONGLOMERATES

BANK OF JAPAN

BANK BANK

BANK

BANKBANK

BANK

ZAIBATSU

MITSUBISHI YASUDA

Dissolved by 1947 Anti-Monopoly Law (AML) of the Supreme Commander of the Allied Powers (SCAP) after WWII

KEIRETSU

• 1952 Laws towards keiretsification of the economy: Kyodo koi (cooperative behavior): cartels among businesses Law against using old clan names abolished

• Old Three groups re-formed: Mitsui, Mitsubishi, Sumitomo New Three groups formed: Fuyo, Sanwa, Dai-Ichi Kangyo

• Banks allowed to own stocks in client companies (against AML)

• Import restrictions & foreign capital restrictions protected cos.

KEIRETSU• “link”, “affiliate with”, “connect to”

• Definition: A keiretsu is a group of individual entities viewed together, usually as a hierarchical organization, involving a flow of goods and services either upwards or downwards in the hierarchy

• Types:

Horizontal: Bank-based Vertical: Manufacturing, Distribution

• Characteristics:

Maintain control and overall management through equity cross- holdings/directorships, financing, joint investments and projects

Diversified but successful in a few principal areas

Not for profit but for stability of its members

COMPARINGSYSTEMS

HORIZONTAL KEIRETSU

INTRA-KEIRETSU TRANSACTIONS

MITSUI

MITSUI

MITSUBISHI

MITSUBISHI

MITSUBISHI

BOT-MITSUBISHI

SUMITOMO

SUMITOMO

SANWA

DKB

RELATIONSHIPS AMONG KEIRETSU

Sakura Bank

1999

Chuo Trust

Mitsui Trust

Dai-Ichi Kangyo Bank

Fuji Bank

Industrial Bank of Japan

Mizuho Trust

Sumitomo Bank

Bank of Tokyo-Mitsubishi

Mitsubishi Trust

Nippon Trust

Sanwa Bank

Tokai Bank

Toyo Trust

Tokai Trust

Tokyo Trust

Asahi Bank

Asahi Trust

Daiwa Bank

Mizuho

HoldingsSumitomo Mitsui Banking Group

Dai-Ichi Kangyo BankFuji BankIndustrial Bank of JapanMizuho Trust

2001

Daiwa Bank HoldingsDaiwa Bank

Kinki Osaka BankNara Bank

Mitsubishi Tokyo Financial Group

Bank of Tokyo-Mitsubishi Mitsubishi TrustNippon TrustTokyo Trust

UFJ HoldingsSanwa Bank Tokai BankToyo TrustTokai Trust

Chuo Mitsui Trust

Sakura Trust

Mizuho Holdings

Sumitomo Mitsui Financial

GroupSumitomo Mitsui Banking Corporation

Mizuho BankMizuho Corporate BankMizuho Trust

2002

Mitsui Trust Holdings

Resona HoldingsDaiwa Bank

Asahi BankKinki Osaka BankNara BankDaiwaTrust

Chuo Mitsui TrustMitsui Asset Trust

Mitsubishi Tokyo Financial

GroupBank of Tokyo-Mitsubishi Mitsubishi Trust

UFJ HoldingsUFJ Bank UFJ Trust

NEW KEIRETSU (FROM 2002)

NEW KEIRETSU (FROM 2008)

Mizuho Financial Group

Mitsubishi UFJ Financial Group

Sumitomo Mitsui Financial

GroupSumitomo Mitsui Banking Corporation

Bank of Tokyo-Mitsubishi UFJMitsubishi UFJ Trust

Mizuho BankMizuho Corporate BankMizuho Trust

2011

Chuo Mitsui Trust Holdings

Resona HoldingsResona Bank

Saitama Resona BankKinki Osaka Bank(Nara Bank)(Resona Trust)Chuo Mitsui Trust

Chuo Mitsui Asset Trust

NEW KEIRETSU

VERTICALKEIRETSU

TOYOTA