How Japan’s economy was built to withstand foreign takeover

Very informative article. This information has been out there for a long time but needs to be refreshed occasionally; nothing really changes. Allot of US industrial and household brands are actually owned by Japanese, and US brands in Japan are usually owned by a japanese subsidiary or wholly owned and silenced. When a US politician starts talking about creating "clean" energy jobs, I suspect they have a micron depth of understanding of how it all works. A "clean" Chinese or Japanese solar panel mfg who is welcomed to the US with tax subsidies etc is not exactly contributing to creating jobs, long term, but rather inviting predatory business practices, that can harm you later.

"Even in the 21st century, this basic structure remains, limiting keiretsu vulnerability toward influence by foreign investors, although it continues to open more to foreign investment."

That's not true.

According to JT "expertise" Japan is bankrupt. They only have some monopoly money to play with.

All they had belongs to the Chinese now.

Good article and equally good comments.

As a former 'tenured' professor at a Japanese college (and a year at Nissho Iwai ... a former Sogo Shosha), in the description of Keiritsu as the conglomeration of industrial, financial, and government, I would add 'educational' institutions to that mix.

I still remember former Prime Minister Abe's plan to make Japanese universities world class by bringing in foreign talent with a world reputation ... but almost in the same breath, appointing an impromptu MEXT committee to try and coerce all public universities to drastically scale back or shut down departments of humanities and social sciences. Only a few of the more financially secure private universities could afford to question the LDP's policy shift. In one sense, the LDP plan was not contradictory because it would have reduced public universities to makers of STEM gadgets, but with only the ruling class having the 'wisdom' or right to know how or where to apply that expertise. But in another sense, it was contradictory. How does one produce robots with A.I. worth its salt ... without social psychologists, anthropologists, and other liberal arts. Kind of begs the question of 'human intelligence' behind those policies.

This vision has fallen short in a number of other ways.

1 — Japan has NOT developed renown for its universities, and is considered by many, 2nd tier even among schools in Far East Asia. Rather, a lot of small, for-profit 'colleges' have sprung up like mushrooms filling the gap for migrant workers by providing perfunctory student visas. The majority of the few foreign university teachers here are temporary migrant workers themselves, 'academic dekasegi' on short contracts ... whether in a STEM field or on the English teaching circuit. Looking at fields where Japan excels ... genetics, robotics, and primatology ... or fields where the don't ... the liberal arts, humanities, the social sciences, and journalism ... other than occasional guest lectures or visits by likes of Noam Chomsky, Michael Sandel, or Frans de Waal ... I don't recall any non-Japanese researcher of world renown working for a Japanese educational institution, much less in a tenured position. From personal experience, labor law and work contracts here in Japan are just a pro forma cover, serving those who manage the Keiretsu, not the individual working within them.

2 — This is not restricted to foreigners. Just last week, NHK announced a continuing drop in the number of Japanese opting for a terminal degree (Ph.D) in their chosen field of study, largely because the big players in Keiretsu do not acknowledge and financially reward creative (and therefore potentially disruptive) expertise in their field. Entry salaries do not reflect that extra three years required for a Ph.D. Notice how quiet the mass media is with the 'sports-competition-propaganda-model' of the Nobel Prize this year? At least one recent Japanese Nobel laureate bemoaned this as a sign of things to come if the short sighted, current business model and government policies do not encourage basic research. The graphs in this article tell it all ... https://www3.nhk.or.jp/nhkworld/en/news/backstories/267/. It was just a few years earlier that the government had another warning when Nobel prize winner Shuji Nakamura (blue light LEDs) pointed out the discrepancy between Japanese patent law, and how it is implemented by the Keiretsu — again, 'law and contracts' as just another tool to control the little people, and when that won't work, traditions or algorithms will do. He was not the first Japanese STEM laureate to urge young Japanese with talent and passion to leave Japan ASAP.

3 — In placing more resources on propping up zombie companies — and Japanese universities are the quintessential zombie company — Japan is beginning to lose even its short-term, economic competitive edge. If the schools were more like educational communities, and leadership was accountable to community stakeholders, schools would be innovative centers for cultural and technical problem-solving. But, again, from my experience, schools tend to be run by bureaucratic functionaries, not accountable to the needs of the local community or the needs of citizens of the nation-state, or even to their own students ... but to government 'stockholders' through government subsidies. While Japanese cars are still world leading, companies like Tesla are beginning to make a dent. And smart phones, televisions, solar power, and probably newer battery technology is quickly losing ground to Chinese and Korean counterparts. If this trend continues, the service sector, and public infrastructure will increasingly have to rely on the hospitality and tourist industry to market and mass produce Japanese cultural exceptionalism. As we are seeing in a comparison between J-pop and K-pop, that too, may be a failing strategy. There are only so many Olympic events to go around.

Though Keiretsu is a Japanese phenomenon, the underlying group dynamics of social psychology are universal — the social primate trying to become the world's first, only, and final 'herding primate' ... and failing by becoming swarming primates. In the U.S., one phrase we use is 'Too Big to Fail' ... until it does. Again and again. More than Hegelian dialectics, I see pretty (and pretty disastrous) mandelbrot sets before my eyes. Meh, maybe just one too many grapefruit sours.

"...excessive government meddling, in the form of mandated lending, likely contributed to a bubble and the economic malaise of the 1990s."

Not really, It was caused by greedy banks and speculators who didn't bother to employ any risk analysis in their decisions. The borrowers put up stocks with inflated values as collateral, for example, which the banks accepted.

I knew a guy in Osaka who bought a house and then kept it purposely empty, at a time when middle income people were struggling to afford a home. These are the people most responsible for the bubble.

@Steve Martin did a kick-ass job of explaining and detailing the precise reason on the reality behind the myth of "Japan was built to withstand any foreign takeover".

@expat , right here explains the precise reason: Nobody wants to buy inefficient and bankrupt Japanese assets! When the Japanese bubble crashed in 1990s, no one even the vulture fund wanted to devour any Japanese assets at all! Even after 1997 Asian Financial Crisis, we saw a lot of assets in South Korea, Thailand, Indonesia, Phillipines getting devoured by foreign investors. Samsung today is a successful example of such when foreign investors took over as the supermajority in the company in 1997. At the very least, South Korean companies, under foreign hands, prospered and thrived with massive profits, while Japanese ones with Japanese owners are dying and withering away.

I want to add my own precipitate into the argument flow. Despite Japanese assets do not attract any foreign buyer, Americans and Chinese are still devouring them. Why? Politics!

Americans always see Japan as a default ATM machine to keep maintaining the USD Petrodollar regime. The USD survived because there is always a demand for the currency. Japan and the UK are the biggest drivers who create artificial high demand for the USD through constantly purchasing US bonds and assets. Japan was rewarded with favorable rights to export high-end goods to the USA under the conditions of the country must transact in USD and re-finance the trade surpluses through buying more USA bonds and assets. Technically, Japan never ever uses American money to buy American currency and assets, so the so-called profits from exports that Japan has never left the USA in the first place! China is an exception to the story, because they use the underworld through laundering FX reserves and resources way beyond any country can do, and it will be a topic for another day. China acts the second largest holder of US debts for a strategic and diplomatic reason not because they can weaponize the debts. In exchange for Japan's loyalty to the USD, the USA sometimes does massive investments to boost up the image of revived Japan. Mostly the USA wants to keep control of certain critical assets tied to Japan's national security to make sure that LDP cronies are not going to betray them. Warren Buffett's purchase of five Sogo shoshas is simply the next stepping stone of American complete takeover of these companies. Controlling the big five Sogo shoshas will enable the USA to control the flows of resources into Japan. There is one big event that most Japanese critics and observers forgot: Softbank with ARM. It came to our knowledge that SoftBank sold the majority of China ARM jv to a Chinese military company, and this forced Trump administration making Masa Son to sell ARM to Nivida to prevent China obtaining chipmaking techs. In conclusion, the USA can do anything to Japan economically and maintains the nation as the little ATM that keeps up the artificial super high demand of the USD.

Now, it is time for China. The Chinese wealthy people have been buying and owning many Japanese real estate assets for a decade now! Just go to Hokkaido, see that almost all tourist companies are Chinese-owned. Go to Kabukeicho, it is jointly owned between Taiwanese and Chinese. Most of the Shibuya is also Chinese. Most Western investors do not have knack for buying real estate assets, while the Chinese (Taiwanese and Vietnamese for cultural similarity) are insane addicts to these assets. Even if they are worthless in the long run, the Chinese still figure out a way to make them valuable and performing. A lot of these Chinese have been living in Japan for a hundred year, the left behind residue of Chinatowns. These people act as middle-person to help mainland Chinese acquiring Japanese real estates with no issue of regulation. In term of real estate, China and Taiwan have completely taken over the whole Japan. Aside real estate, you have Japanese corporations selling off their majority stake of Chinese operations to Chinese shareholders if those Japanese companies want to perform well in China. Almost all Japanese industrial manufacturing are stationed outside Japan, mostly in China, USA and Vietnam. All the profits that Japanese companies make in China are all going into the pocket of Chinese investors, while none of them goes back to Japan. The same story goes with Vietnam as they emulate China economic model of predatory protectionism. China is the master of predatory protectionism as they forced the Keidanren and other Japanese businesses surrendering to the CCP or facing economic consequences. 99% of Japanese firms chose the first. Nowadays, China didn't even care much about Japan because they held Japanese economic might by the balls. China held important real estate assets in Japan and controlled the Japanese means of production in China. Last but not least, the Japanese service economy is now reliant on Chinese tourists. The real major growth for Japan in the next decades will be service economy, primarily catering to the Chinese. When Wuhan was announced first hit by Covid-19, Japanese service industry experienced a chill in the spine as the amount of Chinese tourists dropped. Since Covid-19, many Japanese service businesses, from stores to restaurants, announced bankrupt or are on verge of bankruptcy for one reason, no tourist. No CHINESE tourist! In conclusion, China has lower ability of control over Japan than the USA, but they can do serious damage to Japan through weaponizing the Chinese economy and tourists. For this reason, we see Suga now acting more benevolent towards China, unlike Abe. China wants Japan to fall into its sphere, so the Middle Kingdom can finally complete the good ole days of Celestial Empire where Korea and Japan kowtowed to China. Especially, China wants the USA to gone from Japan, so they can finally expand the naval might into the Pacific Ocean. Of course, the USA will never ever allow it to happen.