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A keiretsu (系列?, lit. system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships and shareholdings. It is a type of business group.

There are three types of keiretsu:

  1. Kigyō shūdan (企業集団 "horizontally diversified business groups"?)
  2. Seisan keiretsu (生産系列 "vertical manufacturing networks"?)
  3. Ryūtsū keiretsu (流通系列 "vertical distribution networks"?)

In Japan

The prototypical keiretsu appeared in Japan during the "economic miracle" following World War II. Before Japan's surrender, Japanese industry was controlled by large family-controlled vertical monopolies called zaibatsu.

During the occupation of Japan, under the Supreme Commander of the Allied Powers, General Douglas MacArthur, a partially successful attempt was made to dissolve the zaibatsu in the late 1940s. Sixteen zaibatsu were targeted for complete dissolution, and twenty six more for reorganization after dissolution. However, the companies formed from the dismantling of the zaibatsu were later reintegrated. The dispersed corporations were re-interlinked through share purchases to form horizontally-integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making the alliances vertically integrated as well. In this period, official government policy promoted the creation of robust trade corporations that could withstand heavy pressures from intensified world trade competition.[1]

The major keiretsu were each centered around one bank, which lent money to the keiretsu's member companies and held equity positions in the companies. Each bank had great control over the companies in the keiretsu and acted as a monitoring entity and as an emergency bail-out entity. One effect of this structure was to minimize the presence of hostile takeovers in Japan, because no entities could challenge the power of the banks.

There are two types of keiretsu: vertical and horizontal. Vertical keiretsu illustrates the organization and relationships within a company (for example all factors of production of a certain product are connected)—while a horizontal keiretsu shows relationships between entities and industries, normally centered around a bank and trading company. Both are complexly woven together and self-sustain each other.

Although the divisions between them have blurred in recent years, there are six major postwar keiretsu:

Name Bank Major group companies
Mitsubishi Mitsubishi Bank (until 1996)
Bank of Tokyo-Mitsubishi (1996–2005)
Bank of Tokyo-Mitsubishi UFJ (2006– )
Mitsubishi Trust and Banking
Financial: Mitsubishi Corporation, Tokio Marine and Fire Insurance, Mitsubishi Estate
Construction: Pacific Consultants International
Food: Kirin Brewery
Electronics: Mitsubishi Electric, Mitsubishi Precision
Cars: Mitsubishi Motors, Mitsubishi Heavy Industries, Mitsubishi Fuso
Petroleum: Nippon Oil, Mitsubishi Oil, Mitsubishi Nuclear Fuel
Precision Machinery: Nikon
Chemicals: Mitsubishi Chemical, Mitsubishi Gas Chemical, Mitsubishi Rayon Co., Ltd., Mitsubishi Materials Corp., Mitsubishi Plastics Industries, Asahi Glass, Nippon Synthetic Chemical Industries (Nippon Gosei)
Paper: Mitsubishi Paper Mills Ltd.
Iron and Steel: Mitsubishi Steel
Shipping: Nippon Yusen
Mitsui Mitsui Bank (until 1990)
Sakura Bank (1990–2001)
Sumitomo Mitsui Bank (2001– )
Financial: Mitsui Real Estate, Mitsukoshi
Food: Nippon Flour Mills, Mitsui Sugar, Suntory
Chemicals: Fuji Photo Film, Mitsui Toatso Chemicals, Mitsui Petrochemical Industries, Toagosei Chemical Industries, Denki Kagaku Kogyo, Daicel Chemical Industries, Mitsui Pharmaceuticals, Mitsui Toatsu Fertilizers, Mitsui Toatsu Dyes, Toray
Petroleum: General Sekiyu, Kyokuto Petroleum Industries
Electronics: Yaussa Corporation, Ibiden Company, Toshiba
Iron and Steel: Japan Steel Works
Sumitomo Sumitomo Bank (until 2001)
Sumitomo Mitsui Bank (2001– ), Sumitomo Trust and Banking
Food: Asahi Breweries
Rail: Hanshin Railway, Keihan Railway, Nankai Railway
Cars: Mazda
Electronics: NEC
Iron and Steel: Sumitomo Metals
Financial: Sumitomo Real Estate
Infrastructure: Nippon Koei
Fuyo Fuji Bank (until 2000)
Mizuho Bank (2000– )
Yasuda Trust and Banking
Yamaichi Securities
Food: Nisshin Flour Milling, Sapporo Breweries
Precision Machinery: Canon, Hitachi, Ricoh
Financial: Marubeni
Chemicals: Showa Denko, NOF Corporation, Kureha Chemical Industries, Nippon Sanso, Hitachi Chemical, Asahi Kasei
Rail: Tobu Railway
Vehicles: Yamaha, Nissan
Retail: Matsuya
Dai-Ichi Kangyo (DKB) Dai-Ichi Kangyo Bank (until 2000)
Mizuho Bank (2000– )
Kankaku Securities
Orient Group
Electronics: Fujitsu, Hitachi, Fuji Electric, Yaskawa Electric, Nippon Columbia
Cars: Isuzu, Kawasaki Heavy Industries
Power Generation: Tokyo Electric Power
Petroleum: Showa Shell Sekiyu
Precision Machinery: Asahi Optical
Trading and Commerce: Seibu, Itochu,
Iron and Steel: Kawasaki Steel, Japan Metals
Chemicals: Denki Kagaku Kogyo-Mitsui Group, Nippon Zeon, Asahi Denka Kogyo, Sankyo Co., Lion Corporation, Kyowa Hakko Kogyo, Asahi Chemical Industries
Sanwa ("Midorikai") Sanwa Bank (until 2002)
UFJ Bank (2002–2006)
Bank of Tokyo-Mitsubishi UFJ (2006– )
Toyo Trust and Banking
Food: Itoham Foods, Suntory
Rail: Hankyu Railway, Keisei Railway
Steel: Kobe Steel,
Precision Machinery: Konica Minolta, Hoya Corporation
Petroleum: Cosmo Oil
Electronics: Hitachi Ltd., Iwatsu Electric, Sharp Corporation, Nitto Denko, Kyocera
Trading and Commerce: Takashiama, Orix,
Chemicals: Ube Industries, Tokuyama Corp, Hitachi Chemical, Sekisui Chemical, Kansai Paint, Tanabe Seiyaku, Fujisawa Pharmaceutical, Daiso Co., Teijin, Unitika Fukusure
Cars: Hitachi Zosen Corp., Daihatsu
Retail: Takashimaya
Cinema: Toho
(Toyota Group)
Tokai Bank
Chuo Trust
Food: Kagome
Cars: Suzuki Motor, Toyota
Steel: Daido Steel
Precision Machinery: Ricoh
Petroleum: Idemitsu Kosan
Electronics: Ushio Industries
Trading and Commerce: Matsuzakaya
Industrial Bank of Japan, New Japan Securities
Wako Securities
IBJ Securities
Cars: Fuji Heavy Industries
Precision Machinery: Ikegai, Riken
Chemicals: Nippon Soda, Chisso Corporation, Nissan Chemical, Tosoh Corporation, Hodogaya Chemical, Plas-Tech, Taihei Chemical, Japan Organo, Kuraray

Toyota is considered the biggest of the "vertically-integrated" keiretsu groups.[2] The banks at the top are not as large as normally required so this is actually considered to be more horizontally integrated than other keirutsu.

The Japanese recession in the 1990s had profound effects on the keiretsu. Many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. This had the effect of blurring the lines between the keiretsu: Sumitomo Bank and Mitsui Bank, for instance, became Sumitomo Mitsui Banking Corporation in 2001, while Sanwa Bank (the banker for the Hankyu-Toho Group) became part of Bank of Tokyo-Mitsubishi UFJ. Additionally, many companies from outside the keiretsu system, such as Sony and Honda, began outperforming their counterparts within the system.

Generally, these causes gave rise to a strong notion in the business community that the old keiretsu system was not an effective business model, and led to an overall loosening of keiretsu alliances. While the keiretsu still exist, they are not as centralized or integrated as they were before the 1990s. This, in turn, has led to a growing corporate acquisition industry in Japan, as companies are no longer able to be easily "bailed out" by their banks, as well as rising derivative litigation by more independent shareholders.

Outside Japan

The keiretsu model has not appeared outside Japan, but many non-Japanese businesses are described as keiretsu such as the Virgin Group (UK), Tata Group (India) and Cisco Systems (USA). Airline alliances such as Oneworld and the Star Alliance have also been described as keiretsu. Generally, these groups exhibit more top-down management, centralized control or (in the case of airline alliances) looser equity ownership connections than do "true" keiretsu. Banks cited as being central to keiretsu-like systems include Deutsche Bank and the early years of JP Morgan and Mellon Financial in the United States. One economic group, the Colombian Grupo Empresarial Antioqueño, is often described as such.

A form of keiretsu can also be found in the cross-shareholdings of the largest U.S. media companies—see Columbia Journalism Review's "Who Owns What" website or They Rule.

There is an angel investor organization called Keiretsu Forum in America, which describes itself as the largest network of angel investors in the world.

South Korean conglomerates, called chaebol, are often compared to keiretsu, but the chaebol conglomerations are much more similar to a Western conglomerate like General Electric or a pre-World War II zaibatsu.


Further reading

  • Masahiko Aoki and Hugh Patrick, The Japanese Main Bank System (1994)
  • Ronald Gilson and Mark J. Roe, "Understanding the Japanese Keiretsu," 102 Yale L.J. 871 (1993)
  • Yoshiro Miwa and Mark Ramseyer, "The Fable of the Keiretsu," 11 J. Econ. & Mgmt. Strategy 169 (2002)
  • Kenichi Miyashita & David Russell, "Keiretsu: inside the hidden Japanese conglomerates" McGraw-Hill (1995)