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This paper explores the interplay of trade credit and short-term bank loans between 1980 and 2012 in Japan. Many of the issues discussed for the U.S. remain largely unexplored for Japan, yet Japan is an interesting country study because of the particular features of its financial sector and its experience of extended zero interest rates. This paper makes three contributions: (1) We develop a new approach to using the Bank of Japan tankan survey, matched with individual firm-level data, to explore the impact of perceived business conditions and credit constraints on trade credit. (2) We divide the 30 years into sub-periods to gain a more granular view of the trade credit-bank loan relationship over time. (3) We use firm-level data to explore the relationship between trade credit and bank loans for listed firms in distress. We find that trade credit was a bank loan substitute during the upswing of the 1980s, but a complement (driven by the transaction motive) during the stagnation of the 1990s and 2000s. At the firm level, trade credit is contingent on the financial health of the borrower. For firms in distress, in the 1980s and 1990s trading partners extended trade credit after the main bank had come to the rescue. In contrast, in the early 2000s, both main banks and trading partners have reduced support of firms in distress, removing any substitution effect. Trade credit discriminates at the micro-level, which explains why previous research has yielded ambiguous results on the substitute versus complement question.

This chapter analyses Japan’s emerging system and argues that it represents an alternative, more balanced approach to corporate governance. In the late 2010s, just as the United States (US) began to search for more stakeholder representation in its Wall Street-oriented system, Japan launched a new system of shareholder capitalism. Japan’s conceptualization of corporate governance has long contrasted with that of the US, where the discourse has been guided by agency theory. Agency theory has come under criticism lately, due to mounting evidence that other theories of motivation are more powerful in explaining outcomes. The global financial crisis with its many instances of ruinous financial engineering and corporate wrongdoing brought to the fore what had long been simmering: the way governance, oversight and executive pay is structured in the US incentivizes managers to take short-sighted actions that are often detrimental to the long-term well-being of the firm.

The authors have requested that this preprint be removed from Research Square.

Using a unique dataset on all major corporate restructuring events in Japan between 1981 and 2010, we assess changes in the role of the main bank in guiding corporate turarounds, and the economic consequences of these changes for distressed firms. We identify firms in distress among all listed firms based on accounting data, and we separately identify firms undergoing corporate restructuring based on a newspaper search for the Japanese term “ saiken” . Even though the ratio of distressed firms has not declined, the incidence of saiken restructuring by such firms has become less frequent after the 1990s, indicating a decline in the governance and rescue role of the main bank. When firms undergo saiken , they adopt real adjustments in terms of labor, assets and finance. While the intensity of these adjustments has also declined over time, saiken firms make more significant adjustments than distressed firms that do not undergo restructuring. The role of saiken was an important part of corporate renewal in Japan, and it has declined. In line with existing research, these findings underscore changes in Japanese corporate governance, in particular regarding the decline of the monitoring and restructuring function of the main bank.

This article adds the Japanese perspective to our knowledge of shared decision-making (SDM) preferences by surveying patients with prostate cancer (PCA) and physicians in Japan. In 2015, 103 Japanese patients with PCA were asked about their SDM preferences by using an Internet-based 5-point-scale questionnaire. Concurrently, 127 Japanese physicians were surveyed regarding their perceptions of patient preferences on SDM. Drivers of preferences and perceptions were analyzed using univariable ordinal logistic regression and graphing the fitted response probabilities. Although 41% of both patients and physicians expressed and expected a desire for active involvement in treatment decisions (a higher rate than in a similar study for the United States in 2001), almost half the Japanese patients preferred SDM, but only 33% of physicians assumed this was their choice. That is, 29% of Japanese physicians underestimated patients’ preference for involvement in making treatment decisions. Patients with lower health-related quality of life (as measured by the Functional Assessment of Cancer Therapy-Prostate [FACT-P]) expressed a stronger preference for SDM. The study shows that the worse the medical situation, the more patients with PCA prefer to be involved in the treatment decision, yet physicians tend to underestimate the preferences of their patients. Perhaps in contrast to common assumptions, Japanese patients are as interested in being involved in decision making as are patients in the United States.

We investigate trades of wholly- or partially-owned subsidiaries between firms listed on the Tokyo Stock Exchange (TSE) for the years 1996–2010, to explore the economic impact in terms of strategic refocusing, stock market valuation and performance effects. By pairing both sides to each deal, we show differences in firm characteristics, returns, and subsequent performance of buying and selling firms. Unlike mergers between whole firms, most subsidiary deals straddled different industries. Most sellers were larger, more diversified and less profitable than buyers. Our event study reveals that abnormal returns were positive for buyers yet insignificantly different from zero for sellers. However, subsidiary sales in the core business earned negative returns, the more so the larger the deal. An analysis of ex-post operating results shows that the performance of sellers often declined after the trade, in particular for firms that divested a core-related subsidiary. We conclude that subsidiary trades in Japan in this period contributed importantly to strategic repositioning and a more efficient use of corporate assets.

This paper investigates how exposure to sunshine affects the suicide rate in Japan, especially in relation to economic variables. Using prefecturebased data on socioeconomic variables for the years...

We use unique data from the private Keio Household Panel Survey to explore profiles of the self-employed in Japan, separately for men and women. We analyze labor market conditions at the time of work force entry as well as personal markers such as age, education, work experience, assets, and family situation. The most persistent finding is that Japan’s labor market continues to be ‘sticky’. For the period 1963–2004, those in self-employment tended to be less educated, older, and less likely to have gathered prior experience through job-hopping. Having a self-employed father also loomed large. In contrast, for 2004–2007, younger age together with assets and possibly young children are associated with self-employment. While the profiles for women with only a high school degree and all men are similar , results for women with a college degree differ consistently, suggesting that educated females face a different choice set in entering self-employment. Finally, we support the determinative nature of Japan’s job market: entering the labor force at a time of weak local labor market conditions significantly increases the odds of becoming self-employed and remaining so in the long run.

Between 1998–2006, Japan's political economy underwent a strategic inflection point, anchored on legal changes so profound that they are irreversible. These reforms sought to enable large companies to shift from the post-war priority on sales and market share toward a new focus on profitability. The arrival of powerful low-cost Asian competitors in assembled goods, and a drastic change in the shareholder structure in Japan brought the end of the ‘developmental state’ approach and necessitated repositioning into innovative, high-margin sectors. The congruence model posits that a successful shift in critical tasks requires a realignment of formal organization, people and culture. For Japan's highly diversified companies, to compete as efficient innovators meant making clear choices what businesses to compete in, and then to restructure to focus on winning in those few businesses. For Japan as a country, the shift in formal organization came through a wholesale change in the underlying approach to law-making...

This panel addresses ongoing strategic challenges in Japan in turning inward-focused, hierarchical, large companies into nimble innovators and renewed R&D powerhouses. While this is a critical task...

This paper analyses changes in the German corporate governance system in the 1990s, using a functional perspective that separates the functions of governance from the institutions that perform these functions. Financial globalization, harmonized legislation within the European Union, and domestic pressures have triggered a move away from the postwar German system of bank-based governance, and towards more market-oriented processes. The paper shows that these forces have resulted in heightening transparency, more active capital markets, and a greatly reduced role of banks in the governance process. However, Germany's 2002 boycott of EU takeover legislation has created a void in the current governance system: because bank intervention and the market for corporate control are substitutes, a reduced role of a banks and protective takeover legislation mean that one important governance function is currently underserved.

This paper addresses the puzzle inherent in cooperative export strategies: to be successful, firms have to cooperate in one market in order to compete in another. Such strategies are exemplified by export associations on the one hand, frequent in the early 20th century and first regulated by the US Webb-Pomerene Act in 1918, and by the sanctuary strategy on the other, whereby companies maintain prices at home and price their products aggressively abroad. This paper discusses the sanctuary strategy as employed by Japanese firms in the 1990s, in light of multimarket contact theory (Barnett and Carroll, 1993, Barnett et al., 1994), and makes a first step to a better understanding of the foundations of this strategy by looking at data collected on Japanese industries in 1995. The paper tests standard notions of cooperation and collusion and also develops new hypotheses to analyze the relevance of internal features of trade associations for self-regulation. The results suggest a set of specific industry and organizational indicators of domestic cooperation. As companies in other Asian countries as well as in transition economies engage in cooperative export strategies to increase competitiveness, these indicators provide a useful tool in determining the likelihood of domestic cooperation that makes such strategies possible.

Japan’s steep postwar growth was nested in a political economy built around producer-oriented policies: by fostering the growth of large firms using the tools of industrial policy, the government could jumpstart development. Many large firms, and their employees, benefited indirectly from this growth program, and very small firms and industries not included in the growth model were compensated through preferential policies or subsidies. Japan’s social contract evolved around this system, having as its centerpiece lifetime employment. The government spent more resources on supporting exporting industries and compensating domestic ones than on building a forward-looking welfare system. Japan’s decade-long economic downturn marks a structural transition towards a postindustrial society. While excelling in producing tangibles, Japan has fallen behind in fostering modern industries, including services; the country also lacks a welfare system to handle increasing structural unemployment that this transition brings about. Without a commitment towards a welfare system and a welfare society, and a reorientation of the social contract towards citizens, Japan is unlikely to transition successfully.

This panel explores new developments in open innovation and entrepreneurship in Japan, by connecting insights derived from theory and existing empirical work with insights gained from recent change...

A major point of contention between Japan and its trading partners has long been the issue of market access and competition. For decades, foreign companies have complained about an "uneven" playing field and limited access to Japan's large, affluent market due to industrial policy, implemented by the Ministry of Economy, Trade, and Industry (METI) and other ministries to uphold vast regulations and protect domestic producers. Foreign governments, in particular that of the United States, backed their domestic corporate interests by initiating a series of trade negotiations intended to increase market access, beginning with agriculture and then progressing to manufacturing, transportation, telecommunication, and the service and financial industries. 1 The Japanese government responded to these pressures with a process of seemingly never-ending "regulatory reforms." This chapter argues that the result of this extended process is a prime example of permeable insulation.

Circumstances have changed dramatically between the early 1990s, when the world hailed Japan as one of its economic superpowers, and the early twenty-first century, as the country entered its second decade of economic stagnation. Domestically, Japan's industries have experienced major structural change, the relocation of production abroad, deregulation, and experimental macroeconomic policy such as zero-level interest rates. Internationally, the rise of the yen after 1985 and the increasing competitiveness of industrializing economies in Asia have reduced opportunities for firms producing inside Japan. At the same time, trade liberalization and financial market integration have increased pressure for governments throughout the developed world to comply with international rules in such diverse areas as competition policy, financial regulation, subsidization of private investment, and the adoption of multilateral trade dispute settlement. External and internal pressures have thus combined to force Japan to ...

As Japan moved into the twenty-first century, it found its position and options within the world economy and within Japan fundamentally changed. In contrast to most of the postwar era, which had been a period of growing opportunities, the 1990s and early twenty-first century were characterized by growing constraints. Legal, political, and economic changes both within and outside Japan had narrowed the possibilities for policy makers and corporations seeking to protect firms and sectors from the challenges of an ever more competitive marketplace.

Between 2002 and 2008, Japan's economy saw constant expansion, a record among the world's advanced economies and Japan's longest period of economic growth since World War II. This remarkable achievement came about because of a transformation of Japanese business practices. This transformation was guided by strategies that enabled Japan's leading corporations, previously diversified to an exceptionally high degree, to become leaner, more nimble, and more competitive at home and in the global economy. In Choose and Focus, the first in-depth account of this strategic inflection point in Japanese business, Ulrike Schaede argues that the emerging practices and attitudes have created a New Japan. Drawing on profiles of several corporations, including Panasonic, Takeda and Astellas, Softbank, kakaku.com, and SBI E*Trade, Schaede explains how the fundamental principles of Japan's economy have been overturned. "Choose and focus" strategies, whereby corporations concentrate on core areas and spin off unrelated businesses, have completely altered the strategic logic of Japan's previous industrial architecture. These surprisingly aggressive moves, Schaede finds, have created new market opportunities for start-up enterprises and foreign investors, as well as a wave of mergers, acquisitions, and hostile takeovers that have shaken Japanese companies out of complacency. Unlike the advances made by Japanese firms in the 1970s and 1980s, the current transformation is taking root in component and materials industries rather than in consumer products. Because of the relative obscurity of the changes and the overshadowing story of China's ascent, the Japanese corporate revolution has gone largely unnoticed among Western observers. Choose and Focus is required reading for anyone doing business in Japan or trying to understand how contemporary Japanese business works and how Japanese corporations have reinvented themselves to face the challenges-and realize the opportunities-of the 21st century.

In Tokyo, a saitori (order clerk) maintains the limitorder book, which is open to all exchange members, but he does not trade in the security. He does set securities prices after trading halts and market closings, following exchange procedures that limit the rate at which prices can change. The exchange also limits total price movement through the imposition of price limits on individual stocks.

This article summarizes the events around the October 19, 1987, Japanese stock market decline. Although Tokyo suffered a "crash," it did not experience the same "panic" as New York, primarily because Tokyo had a more consistent institutional and regulatory structure and could rely on more patient investors. Tokyo can, with certain limitations, be taken as an example of how the "Brady Report" proposals would work in practice. Since Tokyo suffered a crash, if the Brady proposals are designed to prevent a crash, the Japanese experience proves that this cannot be done. On the other hand, if the Brady proposals are not meant to prevent a crash, but rather to help a quick return to an "orderly market," Tokyo can serve as evidence that the Brady proposals are a step in the right direction.