The Myth of the Japanese Miracle:

Though MNC’s are a uniquely American creation, most countries now have their own variations of corporations. While the US government does not directly coordinate with its MNCs, other countries such as Japan have used institutional tools and laws to grow their MNCs and prevent inward FDI.

After the Second World War, the United States under the General Douglas MacArthur began the occupation and reconstruction of Japan. One of the main tasks was breaking up the former imperial family conglomerates , or Zaibatsu. Zaibatsu were family owned conglomerates that dominated the Japanese marketplace. Born out of the desire to not rely on foreign firms to transport their military, the Japanese monarch offered favorable contracts to local firms that grew into the Zaibatsu firms. For example, as Miyashita and Russell explain, Zaibatsu firms held enough power to force then Prime Minister Kato to drastically cut the military budget, which costs the armed forces of three army divisions. Seeing the Zaibatsu as the main factor of Japan’s militaristic government, the US occupying forces chose to break up the firms and nationalize their assets into the contemporary keiretsu.

The keiretsu business model is an association of companies formed around a central bank, stockholders, and a central trading company. Japanese firms use the keiretsu business model to skirt anti-trust laws and change how MNCs interact with each other. US MNC’s will only work together and share resources during strategic alliances to maintain their respective independence. However, the keiretsu model promote resource sharing, with firms looking out for each other , instead of competing with each other to allow simultaneous expansion into the global market.

Theorist have called the rise of Japanese a miracle, theorist Chalmers Johnson has called it less so. The idea of a miracle can be attributed to the notion of orientalism, and the fascination of unprecedented growth in the Asian continent. What Johnson attributes the rise of the Japanese firm to the MITI , or Ministry of International Trade and Industry. What MITI did was use targeted public policy that selected vulnerable global markets. Using previously purchased licensing agreements and shared resources, Japanese firms have created a competitive advantage not relying on natural resources, but cheap high-quality goods that rival there US counterparts. In summary, the Japanese miracle is actually one of targeted public policy. Through a centralized bureaucracy, Japanese firms share resources and look out for each other to target vulnerable markets and create a competitive advantage. By restricting inward FDI, MITI also allowed the growth of their MNCs to go unchallenged, while simultaneously pushing into global markets.

Owen Tsang



Miyashita, K., & Russell, D. (1994). Keiretsu: Inside the Hidden Japanese Conglomerates.

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