Government-business relations in Japan

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.

The Ministries

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 Confucianism. 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.

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 Japanese Association of Corporate Executives (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 Tokyo 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.

Small business

Japan's streets are lined with small shops, grocery stores, restaurants, and coffeehouses. Although supermarkets and large discount department stores 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 toys, footwear, pencils, 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.

See also

References