Kaisha: why growth, not profits, drives Japan Inc

Article Abstract:

Compared to European or American firms, the Japanese corporations, or kaisha, appear to have a highly leveraged growth rate. The conventional view is that the Japanese are able to operate with debts that would be unacceptable by Western standards because the kaisha have a much closer relationship to their financial institutions than is normally found in Europe or the U.S. While there is some truth to this view, it overestimates the risks taken by Japanese banks and it neglects several important differences between American and Japanese accounting practices. The kaisha tend to understate their assets, such as land and securities, to consolidate high-debt businesses into the balance sheets and to include employee housing loans as debts. As a result, Japanese firms are much sounder financially than they look on paper. Monetary policies and investment practices which are unique to Japan are also discussed.

Economic aspects, Comparative analysis, Financial statements

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How to succeed in the Japanese market

Article Abstract:

American firms interested in penetrating Japanese markets face culture clash, global marketing difficulties, and long-term pay-back schedules (from four to seven years may be required to reach profitable operational levels). Trade friction between the U.S. and Japan is attributable to social and cultural differences. Among the differences discussed are: the Japanese ideal of single lifetime employment; the provinciality of Japanese attitudes toward travel, savings and investment; the Japanese emphasis on business relationships (rather than business transactions); the relative unimportance of Japanese stock and capital markets to Japan's overall economy; and Japan's insistence on conducting business in a Japanese way in Japan, while remaining open to international attitudes when transacting business outside Japan.

Social aspects, United States, International business enterprises, Multinational corporations

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Kaisha: why growth, not profits, drives Japan Inc

Article Abstract:

Japanese corporations (or kaishas) are pursuing growth at any cost: borrowing heavily at the expense of profit and dividends to their shareholders. Although there are major exceptions to these generalizations, such as Toyota, Matsushita, Bridgestone and Fuji Film (all of whom have little or no debt and are as profitable as their U.S. counterparts), Japanese firms have demonstrated the power of an aggressive financial policy. U.S. firms need to relax financing principles and move to a higher debt-to-equity ratio to increase their competitiveness. That such aggressive policies can also be effective for U.S. firms was demonstrated by Dow Chemical in the 1960s and 1970s.

Analysis, Debt financing (Corporations), Debt financing, Cash position (Corporate finance)

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