BGR - Session 2

The Japanese Financial System: From Postwar to the New Millennium HBS
Supplementary Reading:Japan: Free, Fair & Global HBS, January 22, 1999
Takeaways
1. It is the underlying aim or focus of the body-politic taken as a whole (or
a significant part of it) that determines the societal paradigm, whether
individualistic or communitarian. The reading demonstrates that the
Japanese society is communitarian.
2. The reading also shows how with the best of intentions, a no holds
barred communitarian approach can lead to systemic deterioration
--- regulatory and governance failures as well as lack of discipline
(including the essential discipline ordinarily imposed by the financial
sector), with potentially disastrous consequences.
3. Obvious issues with Japan trying to be free, global and fair:
Informal restrictions embedded in the system remain e.g. entry
barriers cross border acquisitions/FDI into Japan,
administrative guidance.
Independent regulation is absent!
Accounting standards and disclosure requirements are weak.
Corporate governance (and protection of interests of all
stakeholders) is questionable.
Weak anti-trust protection.
Weak regulation for orderly take-overs.
Poor credit rating system.
4. In a community-oriented, traditional, close-knit, society like Japan,
important aspects of doing business in Japan are:

It is paramount that your enterprise is set up as a joint venture or

partnership with a well-connected Japanese company (which should
preferably be part of a Keiretsu thus acquiring membership of
recognized Japanese club and all the benefits that flow from it).

Essential to develop, over time, close relationships with all

authorities that impact the business not be hostage to the
Japanese partner
.

The business undertaking, and the manner it is carried out, must

not only be aligned with government policy but also with what is
socially acceptable in Japan.

BGR MBA Class of 2015 (Semester IIIB Nov 5 Dec 27, 2014)