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No. 28 — July 23, 1999

 

Feature Article

CORPORATE GOVERNANCE IN JAPAN: REFORM OF TOP CORPORATE MANAGEMENT STRUCTURE by Hiroyuki Takahashi

Summary

A position on a board of directors generally has been the ultimate goal of the "salaryman," but that is changing. Recent times have been a period of hardship for boards of Japanese corporations. A revision of Japan's Commercial Code in 1993 made it easier for stockholders' representatives to file lawsuits. Directors now are being held accountable for scandals involving their companies. The management reforms being implemented by many companies have resulted in a widespread decrease in the number of directors. Salarymen no longer aspire to the position of director as they once did; the chances of becoming a director are decreasing as well.

These changes may be unfortunate for those who wish to become directors, but they are essential if corporate Japan is to keep up with the changes in the market. Furthermore, these reforms are long overdue, and, if present trends continue, the way Japanese companies are managed will change dramatically in the coming years.

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Weekly Review

ECONOMIC WHITE PAPER SUGGESTS PERSISTENT PROBLEMS by Douglas Ostrom

The Japanese economy's surprising 7.9 percent annualized growth in the January-March period (see JEI Report No. 23B, June 18, 1999) has given an enormous boost to economic confidence among a cross section of business and government leaders. However, some Economic Planning Agency policymakers remain guardedly optimistic at best. The drafters of EPA's annual economic white paper, released July 16, take note of the latest encouraging statistics but still adopt an extraordinarily cautious view of the economy's prospects and even acknowledge, albeit somewhat indirectly, past policy mistakes.

 

JAPANESE SECURITIES FIRMS HOPE TO RIDE INTERNET TSUNAMI by Jon Choy

The Internet and the World Wide Web are rapidly transforming how business is done, a fact that Japanese securities companies are discovering firsthand. Japan's stock-trading world already was facing major changes as a consequence of Tokyo's Big Bang financial market deregulation and restructuring blueprint (see JEI Report No. 22A, June 11, 1999). Well before brokerage houses have tested and implemented strategies designed to cope with the most significant Big Bang reforms, on-line interaction and electronic commerce are reshaping the securities playing field into an environment even more estranged from the one in which they prospered during the postwar era. The shift to Internet-based trading not only plays to the strengths of foreign brokerage firms but also has attracted deep-pocketed nonsecurities firms to the market.

 

TOKYO THREATENS TO FREEZE KEDO AID AMID REPORTS OF PLANNED MISSILE LAUNCH by Barbara Wanner

Japanese policymakers and other influentials clearly seem on edge as the one-year anniversary approaches of North Korea's August 1998 test of a multistage rocket over northern Honshu. In the time since Pyongyang launched what Tokyo contends was a ballistic missile but the closed, Stalinist regime insists was a commemorative satellite booster, North Korean participants often have been recalcitrant during four-way peace talks with the United States, South Korea and the People's Republic of China (see JEI Report No. 3A, January 22, 1999). Adding to Japan's worries, Pyongyang sent suspected spy ships into Japanese waters last March, an intrusion that forced Tokyo to take the unprecedented step of dispatching Maritime Self-Defense Force vessels in a failed attempt to interdict the ersatz fishing boats (see JEI Report No. 13B, April 2, 1999).

 

JAPAN, MEXICO TO STRENGTHEN INVESTMENT TIES by Marc Castellano

Japan and Mexico agreed July 16 to hold preparatory talks this fall to discuss the creation of a bilateral investment protection treaty. High-level officials from the two countries met in Tokyo for two days in an effort to enhance cooperation in trade, investment and other areas. It was the first round of a regular dialogue created by Prime Minister Keizo Obuchi and Mexican President Ernesto Zedillo at their November 1998 summit.

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