The Wealthy Classes of Modern Japan: The Age of the Zaibatsu

The humble beginnings of the Zaibatsu

Zaibatsu Definition

The word “zaibatsu” literally means “financial clique” which primarily refers to the wealthy conglomerates in the country. These are people who have a significant influence not only on the economy of the country but also the state of the world’s economy as well. An interesting point to note is the idea that these Zaibatsu have significantly contributed to the economic success of the Japanese between now and the Second World War.

This particular word has been coined in the 19th century and gained popularity after the First World War. Most of the zaibatsu, at the time, were family corporations that had grown into international business conglomerates that controled high percentages of Japanese industries such as manufacturing, mining, banking, and more.

Zaibatsu History

A number of the prominent zaibatsu of today has been established in the late Meiji period. This would mean that these industries have existed in Japan for centuries. However, it was only during the First World War that the concept of the Zaibatsu was used in Japanese vocabulary. Through this time, household names have become influential groups which control over hundreds of smaller corporations.

The significance of zaibatsu in Japanese culture and society

The sudden record-breaking boom in Japan’s economy after the war is still considered until today as an economic miracle. This has impressed industries and nations in different parts of the globe and has won the Japanese a place of pride and power. In fact, this has turned the country into the world’s second largest economy in the 1960s – merely 15 years after the Second World War.

However, this rapid increase led as well to a slow decline. Since the 1990s, the industries in Japan had been slowing down and no massive expansions nor massive growth had been seen which could top how well it did between the 50s and the 60s.

Today, although there is still a number of zaibatsus recognized in Japan, these do not function as it did decades ago. Zaibatsus are known to be family enterprises where no matter how large their corporations may be, it will still single out to a single family. Nowadays, there is horizontal control over the entire enterprise. The introduction of a more distributed division of deciding power had changed the core of the zaibatsu forevermore.

What is interesting is that the zaibatsu is such an influential concept that it is depicted in many fictional organizations in popular culture. This includes Grand Theft Auto, the Mishima Zaibatsu of the Tekken series, and even comics such as Boys Before Flowers (whose main characters are a group of friends comprised of the fictional heirs of the Big Four).

The Japanese economy

There had been a number of curious inquisitions regarding the rise of economic power in Japan. More than 70 years ago, the economy was shattered as a result of the Second World War. In a short amount of time, the country’s GNP has exceeded a few of the major superpowers in Europe such as Britain and France. The question was, how was Japan able to do it? Was the wealth of Japan due to capitalism?

The concept of capitalism is strongly based on individual and private ownership of any form of property. This means that a person living in a capitalist country has the power the purchase objects, choose their lifestyle, and more. This individual right to property can be seen in any society. This could mean that, partly, Japan is also a capitalist country.

However, just like the United States, Japan has a mixed economy. Although capitalism is prevalent, there are restrictions and regulations observed by the government as a means of control over ownership rights. This good balance between government regulation and capitalism may have contributed to the economic success of the country.   

A lot of people believe that the economic success of Japan is largely attributed to the fact that the Japanese are strongly homogenous. This means that they have found ways, although not always successful, to help industries work together.

It has also been found that the Japanese are hyper-productive, as many of their industries focus on mass production of daily goods keeping them a key contributor to the good circulating around the globe. It is also attributed to their very intensive work ethics that the Japanese had pulled off whatever economic success many nations have been trying to achieve for decades.

However, one of the major aspects that have pushed the growth of the Japanese economy through the decades is the automobile industry. A number of conglomerates have monopolized not only the local industry but the international market as well. They have made their cars affordable, irresistible, and attainable and made it highly competitive with household brands.

The most significant Zaibatsu groups in Japan

The Big Four

There are four different groups of companies, known aptly as the Big Four, which is known to have unrelenting financial powers and expertise. Their industrial scope is so diverse that they have enterprises from tax collection up to manufacturing. These are also known to be the four oldest zaibatsus in Japan as most of them have been established in the earlier periods of Japan namely the Edo and the Meiji Period. Through the centuries, they have proved their place in the Japanese economy and may have contributed significantly to the financial strength and power of Japan. The list goes:

Sumitomo – Founded by a man named Masatomo Sumitomo in the early 1600s, the Sumitomo name expands to various industries all over the world. It had humble beginnings as the earliest business the Sumitomo can be traced back to was a small bookstore owned by Sumitomo himself.

Soon enough, the small bookstore had been transformed into a company that smelt and smith copper into springs. Almost a century later, the copper they use for smelting and smithing had been mined personally by the company. A smithing firm has been turned into a mining company. For more than centuries in business, they have expanded to banking, forestry, and more. These form smaller companies under a larger parent company.

This particular company is not anymore considered as a Zaibatsu, instead, it is now considered as a keiretsu. This means that instead of being a single family corporation, it had been transformed into a group of businesses.

Mitsui – Established years after the Sumitomo company was formed, Mitsui was founded by a man named Mitsui Takatoshi. Now, more than a hundred and forty years after it was established, Mitsui is one of the largest corporate groups not only in Japan but in the entire world.

They started as a small stall that sold miso, that has been turned into another business in the form of a pawn shop. This particular shop became so successful that it allowed them to open numerous branches at a time.

Just like the Sumitomo company, Mitsui became a keiretsu post-war. It is turned into a group of companies and had become the parent company of smaller firms in the field of banking, manufacturing, automobile, and more.

Mitsubishi – This probably is one of the most popular and the largest out of the Big Four Zaibatsus. It was established in the late 1800s and is one of the oldest business conglomerates in all of Japan. It had survived through the tribulations of the Edo and Meiji period, however, the Second World War has taken its toll on the company. It was disbanded in the 1940s and was reformed again years later.

Mitsubishi is well known in the industries that involve mining, car manufacturing, construction, aviation, and more. They also offer financial services and insurances to their clientele. It is quite large with a total of 40 individual companies. The difference Mitsubishi has with the other zaibatsu is the fact that it is not controlled by a parent company.

Mitsubishi is so large that it actually comprises a little ver 1% of the entire Japanese GDP. On an average, it can make a profit of about 6 to 7 billion USD a year. In the entire world, there are more than 300,000 employees.

Yasuda – Perhaps the youngest of all the Big Four, Yasuda was established by a young man named Yasuda Zenjiro at the end of the Second World War. It started out as a small firm that provides tax collection services during the Meiji period. Yasuda is well known in the financial industries as one of its first companies is a bank, which is now known as the Fuji Bank. What is interesting about this is that Yoko Ono, the wife of the famous Beatle Star John Lennon is the granddaughter of the famous Yasuda Zenjiro.

Other Popular Zaibatsu

The list of Zaibatsu goes on and on, as there are more business conglomerates that are influential in Japan. These include second-tier zaibatsu like Nissan (one of Japan’s 15 most powerful business groups), Nomura (one of the largest names in the city’s financial management and consulting), Asano (the biggest in Japan’s construction industry), and more.

The term second-tier can make it seem that these are small companies, but these are world-class company groups that had made names for themselves over the past century.

The Economic Purge of Postwar Japan

After the Second World War, the Japanese government was under the rule of the Allied forces. They have helped significantly in the redevelopment, reform, and restructuring of both the economy and the government. One of the first point that the new government focused on was to have a complete dissolution or reorganization of a number of zaibatsu in Japan.

If these zaibatsus were not dissolved, it may have an effect on the overall growth of the Japanese economy. There will be inflation, decrease in the value of the yen, decreased purchasing power and more. The dissolution of a percentage of the zaibatsu may be a hard hit on its familial owners, but it was a good strategy and a good move for the Japanese economy.

The source of success of the Zaibatsu

In general, it is widely believed that the original structure and influence of the zaibatsu was destroyed at the time when the Allied occupation dissolved powerful zaibatsu after the war. Since then, the structure and organization of modernized zaibatsu cannot be returned to how it was before the war.

There are a number of factors which may have led to the success of these zaibatsus in Japan. Upon careful observation, it is believed that family control in the ownership played a significant role. This restricts decision power within the family and the family will retain exclusive rights to the shares. However, it is important to note that a single family maintaining groups of companies will be impossible.

Furthermore, the strict family control does not only make the core of the business much stronger it will also ensure loyalty among its leaders. Since they belong to the same clan, the loyalty of the newly appointed leader will go back to the clan. However, this proves a difficult task as the leader must have excellent skills, knowledge, expertise. These traits are difficult to find in a single individual.

Nowadays, the horizontal control of multiple subsidiaries has decreased the stronghold of loyalty because these may not anymore be led by a member of the founding family. On the other hand, it allows the introduction of an individual which may have skills and knowledge which are much fit for a leadership role.

Another important factor to remember is the fact that there is strict control over credit. A number of these successful zaibatsus restrict the borrowing or transferring of funds from one company to another even though they all belong to the same parent company. This means that any financial downfall of a single arm will not affect the entire financial umbrella.

Lastly, one difference between westernized capitalism and Japanese capitalism is the fact that the zaibatsu did not limit itself to monopolizing a single industry. A challenge was always up for grabs and all conglomerates share equal opportunities in winning over the market. This is largely contributed to the fact that zaibatsus in Japan have expanded to a diverse set of industries creating growth in every aspect – a move which has benefits both economically and socially.