• Home
• >Apply Now
• Loans
  • Overview
  • Fast Loans
    $1,000 - $9,000
  • Express Loans
    $10,000 - $30,000
  • Biz Loans
    Over $30,000
  • Interest Rates
  • Home Loans
  • Other Loans   
    • Bond Loans
    • Office Loans
    • Private Mortgage
    • Debt Consolidation
    • Cash Flow Finance
• How It works
• FAQs
• Latest News
  • Resources
  • Blog
  • Finance Tips
  • Articles
  • News
• About us
• Contact us
• 中文

Back to resources

Under Japan’s postwar commercial law, central holding company was not allowed in keiretsu system. Thus, there was no central strategy for a keiretsu group. Keiretsu companies in the same group are independent from each other and publicly owned. From historic record, by average, keiretsu companies had about 23.4% cross-shareholding. Therefore, it would be difficult for certain keiretsu company to enforce certain strategy through another keiretsu company. It would require all keiretsu companies in the group to come to an agreement. Furthermore, coordination between keiretsu companies occurs at top executives’ level where there is no unstated “gentlemen’s agreement”. If keiretsu system was collusive, we would expect that business contracts among keiretsu companies would be account most of total contract. On the contrary, 70 percent of contracts were with non-keiretsu companies.

Under vertical keiretsu, there was strong connection and relationship between lead firms and suppliers or sub-suppliers. However, suppliers and sub-suppliers had to compete together to become number 1 in lead firms’ selection. In this system, lead firms would not buy product from single source and would not buy at the same percentage across all selected sources. The policy ensured competition for price and quality of product from suppliers. Moreover, lead firms also encouraged number two and number three to compete with the first company by supplying its information. Underperformed suppliers could be replaced from the family. Therefore, Japanese business system is not collusive.

The Japanese facing a major bad debt problem during early 90s until end of 90s where the debt to GDP ratio was higher than one. Why debt is high? During 1989 to 1992, real estate price in japan dropped in great value. This had significant impact on Japanese companies because decreased value of real estate price had impact on Japan’s stock exchange which reduced the stock prices of Japanese companies. Furthermore, real estate prices created more liability for Japanese bank by large loan portfolio from Japanese companies. During 1991-2000 period, the average annual growth rate of per capita GDP was 0.5% compared to the US 2.6%.

Challenge for Japanese companies in 1990s was the change of strategy. Companies could not rely on bank capital to expand their market shares. They had to expand through their own profits. Thus, Japanese companies had to focus on projects that would increase significant profits. Japanese challenging scenario is always a trouble to the world, because as we all know that Japanese is a very important place around the globe.

Cash Finance take no liability on content shown, please consult your legal and financial adviser before making any financial decision.