What is Zaibatsu? Japanese Financial Circle

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Zaibatsu [財閥] is a Japanese term that literally means financial circle and refers to vertically integrated commercial and industrial conglomerates in the Empire of Japan, whose influence and size allowed control of significant parts of the economy.

The Zaibatsu had an influence from the Meiji period until the end of Second World War. Soon they were dissolved by the allied occupation forces and succeeded by the keiretsu (groups of banks, manufacturers, suppliers and distributors.

The history of Zaibatsu

The term "zaibatsu”Was coined in the 19th century from the Sino-Japanese roots zai [財] which means wealth and batsu [閥] which means click or group. Although zaibatsu itself existed, the term was not in common use until after World War I.

By definition, they were large vertical family-controlled monopolies, consisting of a holding at the top, with a wholly owned banking subsidiary that provided financing, and several industrial subsidiaries that dominate specific sectors of a market, either exclusively or through several subsidiary companies .

Companies like Mitsui, Mitsubishi, Sumitomo and Yasuda are the 4 biggest examples of Zaibatsu.

Largest financial circles from Japan

Zaibatsu was the heart of the economic and industrial activity of the Empire of Japan and had a major influence on Japanese national and foreign policies. They were viewed with suspicion by both the right and the left in the 1920s and 1930s.

The political party Rikken Seiyūkai was considered an extension of the Mitsui group, which also had strong connections with the Japanese Imperial Army. Likewise, the Rikken Minseitō it was connected to the Mitsubishi group, as well as the Japanese Imperial Navy.

At the beginning of World War II, only the big four (Mitsubishi, Sumitomo, Yasuda and Mitsui) had direct control over more than 30% of Japan's mining, chemical and metals industries and almost 50% of the machinery and equipment market, a significant part foreign commercial fleet and 70% from the commercial stock exchange.

Although the world was experiencing a global economic depression, the zaibatsu were prospering through currency speculation, low labor costs and military purchases.

The issues came to a head in the March 1932 Blood Incident League, with the assassination of Mitsui's managing director, after which zaibatsu tried to improve his public image by increasing his charity work.

What is zaibatsu? Japanese financial circle

Zaibatsu List

In the zaibatsu era we had the “Big Four” which are the 4 largest and most significant groups. Two of them, Sumitomo and Mitsui, have roots in the Edo period, while Mitsubishi and Yasuda trace their origins back to the Meiji Restoration.

In Meiji, until Shōwa, the government employed its financial powers and expertise for various endeavors, including tax collection, military purchases and foreign trade.

In addition to the big four, there is a lack of consensus on which companies can be called zaibatsu and which are not. The initial allowed for some public stakes in some subsidiary companies, but never in the main holding or subsidiaries.

After the Russo-Japanese War, several so-called “second tier” zaibatsu also emerged, mainly as a result of commercial conglomerates and / or the award of lucrative military contracts.

Zibatsu's monopoly business practices resulted in a closed circle of companies until the beginning of Japanese industrial expansion in Asia (Manchukuo) in the 1930s, which allowed for the emergence of new groups, including Nissan.

These new zaibatsu differed from the traditional one only in that they were not controlled by specific families and not in terms of commercial practices. Below we will see a complete list of all these first and second tier groups:

The Big Four:

  • Mitsubishi (三菱財閥)
  • Mitsui (三井財閥)
  • Sumitomo (住友財閥)
  • Yasuda (安田財閥)

Second layer:

  • Asano (浅野財閥)
  • Fujita (藤田財閥)
  • Furukawa (古河財閥)
  • Mori (森コンツェルン)
  • Kawasaki (川崎財閥)
  • Nakajima (中島飛行機)
  • Nichitsu (日窒コンツェルン)
  • Nissan (日産コンツェルン)
  • In this (日曹コンツェルン)
  • Nomura (野村財閥)
  • Okura (大倉財閥)
  • Riken (理研コンツェルン)
  • Shibusawa (渋沢財閥)
  • Suzuki shoten (鈴木商店) [bankrupt]
What is zaibatsu? Japanese financial circle

Post-war dissolution

The zaibatsu was viewed with some ambivalence by the Japanese military, who nationalized a significant part of its production capacity during World War II. The remaining assets were also heavily damaged by destruction during the war.

Under the occupation of the Allies after Japan's surrender, an attempt was made to dissolve zaibatsu. Many of the economic consultants were very suspicious of monopolies and restrictive business practices, which appeared inefficient and undemocratic.

During the occupation of Japan, sixteen zaibatsu were targeted for complete dissolution and another twenty-six for reorganization after dissolution. Among those that were dissolved in 1947 were Asano, Furukawa, Nakajima, Nissan, Nomura and Okura.

In addition, Yasuda dissolved in 1946. The assets of the controlling families were confiscated, the companies eliminated and interconnected boards, essential to the old system of coordination between companies, were prohibited.

Matsushita Electric Industrial Company (which later became Panasonic), while not a zaibatsu, was also originally the target of a disruption, but was saved by a petition signed by 15,000 of its union workers and families.

However, the complete dissolution of zaibatsu was never achieved, mainly because the US government rescinded orders in an effort to reindustrialize Japan as a bulwark against communism in Asia.

Zaibatsu as a whole was widely considered to be beneficial to the Japanese economy and government. but all opinion, bureaucracy and policy change after the second war, served as an obstacle that led to his death.

What is zaibatsu? Japanese financial circle

Zaibatsu Today

Today, the influence of zaibatsu can still be seen in the form of financial groups, institutions and larger companies, whose origins date back to the original, usually sharing the same family names (example, Sumitomo Mitsui Banking Corporation).

Some argue that the old financial and administrative control mechanisms used by zaibatsu have already been destroyed. What we have today are horizontal relations of association and coordination of keiretsu [系列] which means “series” or “subsidiary”.

Despite the absence of a comprehensive change in the existence of large industrial conglomerates in Japan, zaibatsu’s previous vertically integrated chain of command, ending with a single family, was widely displaced.

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