The Japanese Economy after the Flux Decade: Where Will Changes in Company Structure Lead?

prisme10Prisme N°10 September 2007

Masahiko Aoki

Prisme N°10 September 2007 (186.3 KiB)


How should one interpret the changes in Japan’s company structure that have been affecting the Japanese economy since the early 1980s? This text proposes a conceptual framework from the firm’s point of view, after examining empirical evidence. Has Japan’s corporate governance made a substantive institutional transformation, and, if so in which direction? Four stylized analytical models of corporate governance are presented, and the conditions in which each would be viable are identified.

Using this theoretical background, the text examines the driving forces, as well as the historical constraints, of the changes taking place in Japan. The nature of the on-going institutional changes in Japan’s corporate governance can be interpreted as a possible transition from the traditional bank-oriented model to a hybrid model, built on the combination of managerial choice of business model, employees’ human assets, and stock-market evaluations. No single mechanism has emerged as dominant, but a variety of patterns seems to be evolving.