Keiretsu: Rethinking U.S. and Japanese Policy

For twenty-five years, the U.S. and Japanese governments have seen the rise of corporate groups in Japan, keiretsu, as due in part to foreign pressure to liberal-ize the Japanese market. In fact, virtually all works that discuss barriers in a historical context argue that Japanese corporations acted to insulate themselves from foreign takeovers by privately placing shares with each other (See, e.g., Encarnation 1992,76; Mason 1992; and Lawrence 1993). The story has proved to be a major boon for the opponents of a neoclassical approach to trade and investment policy. Proponents of the notion of “Japanese-style capitalism ” in the Japanese government can argue that they did their part for liberalization and cannot be held responsible for private-sector outcomes. Meanwhile, pro-ponents of results-oriented policies (ROPs) can point to yet another example of how the removal of one barrier led to the formation of a second barrier. While agreeing with the basic conjecture that high levels of corporate own-ership may work to deter takeovers in Japan, the argument presented here sug-gests that it is not cultural or institutional factors that produce corporate groups and high levels of stable shareholding but rather conventional government pol-David E. Weinstein is research associate professor in the School of Business Administration a