POL 10004, Fall 2001

A. Barnes
Industrial Organization:
The keiretsu system of Japan

State body (MITI and MOF in Japan) restricts access to international capital.
Through the Central Bank, the planning organization offers preferential credits to industrial
conglomerates working in targeted sectors.
Within the conglomerates, there are long-standing ties between banks and industrial firms (and
among firms within the same economic group).
This form of organization reduces market uncertainties, allows subsidies across firms, guarantees
markets for within-group firms, and permits longer investment time-horizons than in the US
system.
Within the major industrial firms, there are relatively generous labor relations (for example,
"lifetime employment" and seniority wages) but weak unions.

MITI
(and MOF)

Central Bank

Bank

Bank

Industrial
Firms

Bank

Bank