Japan’s Keiretsu System Should Not Be Feared

Leslie Helm’s article of June 21, “For a Japanese Keiretsu, It’s a Family Affair,” exaggerates the role of keiretsu in the Japanese economy.

The keiretsu system is not a specter of unfairness and exclusion, as asserted. In making a buying decision, no more than 3% of all keiretsu members surveyed cite “group loyalty” as important. The factors which are overwhelmingly considered are product quality, price and supply stability. In the midst of a very tough business climate, it is unimaginable that Sumitomo Bank’s choice of NEC over NCR computers would be based upon much else but such prudent economic factors.

Contrary to allegations of orchestrated buying behavior, other financial services firms in the group, such as Sumitomo Trust Bank, Sumitomo Life Insurance and Sumitomo Fire & Marine, reportedly rely either upon IBM or Fujitsu standards and hardware.

Mutual holding of shares in a keiretsu is not of a scale to govern market decisions. On average, firms within a group own only about 1.5% of each others’ stock--with such ownership amounting to about 20% of the shares of any given company. Some large U.S. firms are even more integrated, with Ford Motor Co. owning 40% of Excel Industries and 49% of Hertz, for example. Mutual holding of shares in Japanese companies looks less like a conspiracy and more like a growing international pattern.

The Times article also misstated average sales by keiretsu members to others within the same group as 11.7% of their total 1981 sales, falling to 10.8% recently. It was actually 10.8% in 1981, dropping to 7.3% of their total recent sales.

With aggregate sales for the member firms of the six large keiretsu groups amounting to as much as 16% of Japan’s GNP, it requires a heroic leap of logic to conclude that the above 7.3% figure suggests an overt and exclusionary preference for doing business within their own groups.

On the other hand, if in fact unfair or collusive behavior attributable to keiretsu ties does crop up, it goes without saying that Japan’s Fair Trade Commission will step in.

I should also add that for 77% of the American companies active in Japan, the effect of keiretsu on their business is either positive or neutral, according to a 1991 American Chamber of Commerce in Japan report.

I fear that exaggerated or inaccurate accounts of the role and impact of keiretsu perpetuate misconceptions and discourage balanced discussion of this and other economic issues facing the United States and Japan.

KOICHI HARAGUCHI

Haraguchi is Japan’s consul general in Los Angeles.