Government-business relations in Japan
Encyclopedia
Government-business relations are conducted in many ways and through numerous channels in Japan
. The most important conduits in the postwar period are the economic ministries: the Ministry of Finance
and the Ministry of Economy, Trade and Industry
(METI, formerly the Ministry of International Trade and Industry, known as MITI). The Ministry of Finance has operational responsibilities for all fiscal affairs, including the preparation of the national budget. It initiates fiscal policies and, through its indirect control over the Bank of Japan
, the central bank, is responsible for monetary policy
as well. The Ministry of Finance allocates public investment, formulates tax policies, collectes taxes, and regulates foreign exchange.
. Japan often has been defined as a Confucian country, but one in which loyalty is more important than benevolence. Leadership stemmed from the government and authority in general, and business looked to government for guidance. These attitudes, coupled with the view of the nation as a family
, allowed government to influence business, and businesses worked hard not only for their own profits but also for national well-being. There was a national consensus that Japan must be an economic power and that the duty of all Japanese was to sacrifice themselves for this national goal. Thus, the relationship between government and business was as collaborators rather than as mutually suspicious adversaries.
headquarters serves as a kind of "nerve center" for the country's most important enterprises, and it works closely with the powerful Ministry of International Trade and Industry (MITI). There is evidence, however, suggesting that the federation's power is not what it had been, partly because major corporations, which had amassed huge amounts of money by the late 1980s, are increasingly capable of operating without its assistance.
Nikkeiren was concerned largely with labor-management relations and with organizing a united business front to negotiate with labor unions on wage demands during the annual "Spring Struggle". The Keizai Doyu Kai, composed of younger and more liberal business leaders, assigned itself the role of promoting business's social responsibilities. Whereas Keidanren and Nikkeiren were "peak organizations", whose members themselves were associations, members of the Keizai Doyu Kai were individual business leaders (see Labor unions in Japan
).
Because of financial support from corporations, business interest groups were generally more independent of political parties than other groups. Both Keidanren and the Keizai Doyu Kai, for example, indicated a willingness to talk with the Japan Socialist Party in the wake of the political scandals of 1988-89 and also suggested that the LDP might form a coalition government with an opposition party. Yet through an organization called the People's Politics Association (Kokumin Seiji Kyokai), they and other top business groups provided the Liberal Democratic Party
(LDP) with its largest source of party funding.
s, restaurant
s, and coffeehouse
s. Although supermarket
s and large discount department store
s are more common than in the 1980s, the political muscle of small business
associations was reflected in the success with which they blocked the nationalization of the country's distribution system. The Large-Scale Retail Store Law of 1973, amended in 1978, made it very difficult in the late 1980s for either Japanese or foreign retailers to establish large, economically efficient outlets in local communities.
Many light industrial
goods, such as toy
s, footwear
, pencil
s, and kitchen utensils, were still manufactured by small local companies rather than imported from the Republic of Korea
, Taiwan
, or Hong Kong
. Traditional handicrafts, such as pottery
, silk
weaving, and lacquerware
, produced using centuries-old methods in small workshops, flourished in every part of the country. Apart from protectionism
of the "non-tariff barrier" variety, the government ensured the economic viability of small enterprises through lenient tax policies and access to credit on especially favorable terms.
Major associations representing small and medium-sized enterprises included the generally pro-LDP Japan Chamber of Commerce and Industry (Nihon Shoko Kaigisho, or Nissho for short), which was established in 1922 but whose origins are traced to the establishment of the Tokyo Chamber of Commerce and Industry in 1878, the National Central Association of Medium and Small Enterprise Associations, the Japan League of Medium and Small Enterprise Organizations, and the Japanese Communist Party
-sponsored Democratic Merchants and Manufacturers Association.
Although small enterprises in services and manufacturing preserved cultural traditions and enlivened urban areas, a major motivation for government nurturing of small business was social welfare. In Calder's words, "Much of small business, particularly in the distribution sector, serves as a labor reservoir. Its inefficiencies help absorb surplus workers who would be unemployed if distribution
, services, and traditional manufacturing
were uniformly as efficient as the highly competitive and modernized export sectors.
Lately, however, government relations agencies such as GR Japan and ShinNihon Public Affairs have started to appear also in Japan, run by former diplomats, members of parliament, and civil servants.
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
. The most important conduits in the postwar period are the economic ministries: the Ministry of Finance
Ministry of Finance (Japan)
The ' is one of cabinet-level ministries of the Japanese government. The ministry was once named Ōkura-shō . The Ministry is headed by the Minister of Finance , who is a member of the Cabinet and is typically chosen from members of the Diet by the Prime Minister.The Ministry's origin was back in...
and the Ministry of Economy, Trade and Industry
Ministry of Economy, Trade and Industry (Japan)
The or METI, is a ministry of the Government of Japan. It was created by the 2001 Central Government Reform when the Ministry of International Trade and Industry merged with agencies from other ministries related to economic activities, such as the Economic Planning Agency.METI, which used to be...
(METI, formerly the Ministry of International Trade and Industry, known as MITI). The Ministry of Finance has operational responsibilities for all fiscal affairs, including the preparation of the national budget. It initiates fiscal policies and, through its indirect control over the Bank of Japan
Bank of Japan
is the central bank of Japan. The Bank is often called for short. It has its headquarters in Chuo, Tokyo.-History:Like most modern Japanese institutions, the Bank of Japan was founded after the Meiji Restoration...
, the central bank, is responsible for monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
as well. The Ministry of Finance allocates public investment, formulates tax policies, collectes taxes, and regulates foreign exchange.
The Ministries
- The Ministry of Finance establishes low interest rateInterest rateAn interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s and, by thus reducing the cost of investment funds to corporations, promotes industrial expansion. - METI is responsible for the regulation of production and the distribution of goods and services. It is the "steward" of the Japanese economy, developing plans concerning the structure of Japanese industry. The former MITI had several special functions: controlling Japan's foreign trade and supervising international commerce; ensuring the smooth flow of goods in the national economy; promoting the development of manufacturing, mining, and distribution industries; and supervising the procurement of a reliable supply of raw materials and energy resources.
- The Ministry of Land, Infrastructure and TransportMinistry of Land, Infrastructure and Transport (Japan)The , abbreviated MLIT, is a ministry of the Japanese government. It is responsible for one-third of all the laws and orders in Japan and the largest Japanese ministry in terms of employees, as well as the second-largest organ of the Japanese government after the Ministry of Defense...
is responsible for oversight of all land, sea, and air transport. It is charged with supervising all construction in Japan and Japanese-supported construction abroad. Its responsibilities also include land acquisition for public use and environmental protection as it relates to construction. - The Ministry of Health, Labour and WelfareMinistry of Health, Labour and Welfare (Japan)The ' is a cabinet level ministry of the Japanese government. It is commonly known as Kōrō-shō in Japan. This ministry provides regulations on maximum residue limits for agricultural chemicals in foods, basic food and drug regulations, standards for foods, food additives, etc.It was formed with...
is responsible for supervising and coordinating all health and welfare services. - The former Ministry of Posts and Telecommunications was responsible for the postal service and electronic communications, functions now filled by Japan PostJapan Postwas a government-owned corporation in Japan, that existed from 2003–2007, offering postal and package delivery services, banking services, and life insurance. It had over 400,000 employees and ran 24,700 post offices throughout Japan and was the nation's largest employer. One third of all Japanese...
and Nippon Telegraph and TelephoneNippon Telegraph and Telephone, commonly known as NTT, is a Japanese telecommunications company headquartered in Tokyo, Japan. Ranked the 31st in Fortune Global 500, NTT is the largest telecommunications company in Asia, and the second-largest in the world in terms of revenue....
and their private competitors.
Japan, Inc.
Although Japan's economic development is primarily the product of private entrepreneurship, the government has directly contributed to the nation's prosperity. Its actions have helped initiate new industries, cushion the effects of economic depression, create a sound economic infrastructure, and protect the living standards of the citizenry. Indeed, so pervasive has government influence in the economy seemed that many foreign observers have popularized the term "Japan Inc." to describe its alliance of business and government interests. Whether Japan still fits this picture after several reforms in the 1980s and 1990s seems questionable, but there is little doubt that government agencies continue to influence the economy through a variety of policies.Attitudes toward government direction
Japanese attitudes towards government have historically been shaped by ConfucianismConfucianism
Confucianism is a Chinese ethical and philosophical system developed from the teachings of the Chinese philosopher Confucius . Confucianism originated as an "ethical-sociopolitical teaching" during the Spring and Autumn Period, but later developed metaphysical and cosmological elements in the Han...
. Japan often has been defined as a Confucian country, but one in which loyalty is more important than benevolence. Leadership stemmed from the government and authority in general, and business looked to government for guidance. These attitudes, coupled with the view of the nation as a family
Japanese family
The family in Japan is called “Kazoku” in Japanese. It is basically composed of a couple as is the family in other societies. The Japanese family is based on the line of descent...
, allowed government to influence business, and businesses worked hard not only for their own profits but also for national well-being. There was a national consensus that Japan must be an economic power and that the duty of all Japanese was to sacrifice themselves for this national goal. Thus, the relationship between government and business was as collaborators rather than as mutually suspicious adversaries.
Corporate organizations
Links between the corporate world and government in Japan were maintained through three national organizations: the Federation of Economic Organizations (Keizai Dantai Rengokai—Keidanren), established in 1946; the Japan Committee for Economic Development (Keizai Doyu Kai), established in 1946; and the Japan Federation of Employers Association (Nihon Keieishadantai Renmei—Nikkeiren), established in 1948. Keidanren is considered the most important. Its membership includes 750 of the largest corporations and 110 manufacturers' associations. Its TokyoTokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
headquarters serves as a kind of "nerve center" for the country's most important enterprises, and it works closely with the powerful Ministry of International Trade and Industry (MITI). There is evidence, however, suggesting that the federation's power is not what it had been, partly because major corporations, which had amassed huge amounts of money by the late 1980s, are increasingly capable of operating without its assistance.
Nikkeiren was concerned largely with labor-management relations and with organizing a united business front to negotiate with labor unions on wage demands during the annual "Spring Struggle". The Keizai Doyu Kai, composed of younger and more liberal business leaders, assigned itself the role of promoting business's social responsibilities. Whereas Keidanren and Nikkeiren were "peak organizations", whose members themselves were associations, members of the Keizai Doyu Kai were individual business leaders (see Labor unions in Japan
Labor unions in Japan
Labour unions emerged in Japan in the second half of the Meiji period as the country underwent a period of rapid industrialization. Until 1945, however, the labour movement remained weak, impeded by lack of legal rights, anti-union legislation, management-organized factory councils, and political...
).
Because of financial support from corporations, business interest groups were generally more independent of political parties than other groups. Both Keidanren and the Keizai Doyu Kai, for example, indicated a willingness to talk with the Japan Socialist Party in the wake of the political scandals of 1988-89 and also suggested that the LDP might form a coalition government with an opposition party. Yet through an organization called the People's Politics Association (Kokumin Seiji Kyokai), they and other top business groups provided the Liberal Democratic Party
Liberal Democratic Party (Japan)
The , frequently abbreviated to LDP or , is a centre-right political party in Japan. It is one of the most consistently successful political parties in the democratic world. The LDP ruled almost continuously for nearly 54 years from its founding in 1955 until its defeat in the 2009 election...
(LDP) with its largest source of party funding.
Small business
Japan's streets are lined with small shops, grocery storeGrocery store
A grocery store is a store that retails food. A grocer, the owner of a grocery store, stocks different kinds of foods from assorted places and cultures, and sells these "groceries" to customers. Large grocery stores that stock products other than food, such as clothing or household items, are...
s, restaurant
Restaurant
A restaurant is an establishment which prepares and serves food and drink to customers in return for money. Meals are generally served and eaten on premises, but many restaurants also offer take-out and food delivery services...
s, and coffeehouse
Coffeehouse
A coffeehouse or coffee shop is an establishment which primarily serves prepared coffee or other hot beverages. It shares some of the characteristics of a bar, and some of the characteristics of a restaurant, but it is different from a cafeteria. As the name suggests, coffeehouses focus on...
s. Although supermarket
Supermarket
A supermarket, a form of grocery store, is a self-service store offering a wide variety of food and household merchandise, organized into departments...
s and large discount department store
Department store
A department store is a retail establishment which satisfies a wide range of the consumer's personal and residential durable goods product needs; and at the same time offering the consumer a choice of multiple merchandise lines, at variable price points, in all product categories...
s are more common than in the 1980s, the political muscle of small business
Small business
A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships...
associations was reflected in the success with which they blocked the nationalization of the country's distribution system. The Large-Scale Retail Store Law of 1973, amended in 1978, made it very difficult in the late 1980s for either Japanese or foreign retailers to establish large, economically efficient outlets in local communities.
Many light industrial
Light industry
Light industry is usually less capital intensive than heavy industry, and is more consumer-oriented than business-oriented...
goods, such as toy
Toy
A toy is any object that can be used for play. Toys are associated commonly with children and pets. Playing with toys is often thought to be an enjoyable means of training the young for life in human society. Different materials are used to make toys enjoyable and cuddly to both young and old...
s, footwear
Footwear
Footwear consists of garments worn on the feet, for fashion, protection against the environment, and adornment. Being barefoot is commonly associated with poverty, but some cultures chose not to wear footwear at least in some situations....
, pencil
Pencil
A pencil is a writing implement or art medium usually constructed of a narrow, solid pigment core inside a protective casing. The case prevents the core from breaking, and also from marking the user’s hand during use....
s, and kitchen utensils, were still manufactured by small local companies rather than imported from the Republic of Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
, or Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
. Traditional handicrafts, such as pottery
Japanese pottery
Japanese pottery and porcelain , one of the country's oldest art forms, dates back to the Neolithic period...
, silk
Silk
Silk is a natural protein fiber, some forms of which can be woven into textiles. The best-known type of silk is obtained from the cocoons of the larvae of the mulberry silkworm Bombyx mori reared in captivity...
weaving, and lacquerware
Lacquerware
Lacquerware are objects decoratively covered with lacquer. The lacquer is sometimes inlaid or carved. Lacquerware includes boxes, tableware, buttons and even coffins painted with lacquer in cultures mostly in the Eastern Hemisphere.-History:...
, produced using centuries-old methods in small workshops, flourished in every part of the country. Apart from protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
of the "non-tariff barrier" variety, the government ensured the economic viability of small enterprises through lenient tax policies and access to credit on especially favorable terms.
Major associations representing small and medium-sized enterprises included the generally pro-LDP Japan Chamber of Commerce and Industry (Nihon Shoko Kaigisho, or Nissho for short), which was established in 1922 but whose origins are traced to the establishment of the Tokyo Chamber of Commerce and Industry in 1878, the National Central Association of Medium and Small Enterprise Associations, the Japan League of Medium and Small Enterprise Organizations, and the Japanese Communist Party
Japanese Communist Party
The Japanese Communist Party is a left-wing political party in Japan.The JCP advocates the establishment of a society based on socialism, democracy and peace, and opposition to militarism...
-sponsored Democratic Merchants and Manufacturers Association.
Although small enterprises in services and manufacturing preserved cultural traditions and enlivened urban areas, a major motivation for government nurturing of small business was social welfare. In Calder's words, "Much of small business, particularly in the distribution sector, serves as a labor reservoir. Its inefficiencies help absorb surplus workers who would be unemployed if distribution
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
, services, and traditional manufacturing
Japanese handicrafts
The many and varied traditional handicrafts of Japan are officially recognised and protected and, owing to the folk art movement, are much in demand. Some enjoy status as a meibutsu or regional specialty. Each craft demands a set of specialized skills...
were uniformly as efficient as the highly competitive and modernized export sectors.
Lately, however, government relations agencies such as GR Japan and ShinNihon Public Affairs have started to appear also in Japan, run by former diplomats, members of parliament, and civil servants.
See also
- Economy of JapanEconomy of JapanThe economy of Japan, a free market economy, is the third largest in the world after the United States and the People's Republic of China, and ahead of Germany at 4th...
- Industrial policy of JapanIndustrial policy of JapanA complicated system of Industrial Policies was devised by the Japanese Government after World War II and especially in the 1950s and 1960s. The goal was to promote industrial development, and it cooperated closely for this purpose with private firms...
- AmakudariAmakudariis the institutionalised practice where Japanese senior bureaucrats retire to high-profile positions in the private and public sectors. The practice is increasingly viewed as corrupt and a drag on unfastening the ties between private sector and state which prevent economic and political...
: retired bureaucrats joining the ranks of Japanese companies