Keiretsu

A keiretsu (系列, literally system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships and shareholdings. It is a type of informal business group. The keiretsu maintained dominance over the Japanese economy for the last half of the 20th century.

The member companies own small portions of the shares in each other's companies, centered on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects. It is a key element of the automotive industry in Japan.

History

The corporate governance of Japan dates back to the 19th century, much of which was propelled by the formation of the Meiji Restoration in 1866 by the Japanese government, the same time when the world entered the Industrial Revolution. These formations were termed zaibatsu. Prior to the war, Japan remained dominated by four major zaibatsu: Mitsubishi, Sumitomo, Yasuda and Mitsui. They focused on steel, banking, international trading and various other key sectors in the economy, all of which was controlled by a holding company. Apart from this, they remained in close connection to influential banks that provided funding to their various projects.