Historical Dynamics of the Development of the Corporate Governance in Japan

  •  Yuzuo Yao    


Japan has developed a unique corporate governance structure over centuries, often in response to changes or crises in history. Recently, the loss and scandals have pushed the defects of the existing corporate governance mechanism into the spotlight. To answer whether the Japanese model will and should change, I need to understand how this system came into being and what has made a great impact on its development. Arguably, legal, political and cultural systems have promoted and shaped the Japanese model of corporate governance in particular ways. First, this essay finds that the Japanese corporate governance was historically heavily influenced by its legal origin, which has not been taken as a direct reason but an indirect reason. The courts in Civil Law countries could not resist governments’ power and therefore gave politics opportunities to influence the development of the Japanese corporate governance directly. Second, the strong political forces favored financial institutions in corporate governance finance and employees during the war years and occupation but currently, these political influences are weak or have disappeared and central planning structure is discredited. It is time for Japan to make certain changes. Third, Japan has undertaken massive reforms of the corporate governance mechanism from the 1990s but it could not drop everything that is deeply rooted in its traditional culture. Hence, it is proposed that the keiretsu system and the lifetime employment should not disappear in the future albeit certain reforms are necessary in Japan.

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