After Japan’s surrender (1945) in World War II, the breakup of the zaibatsu was announced as a major aim of the Allied occupation. Assets were seized, holding companies were eliminated, interlocking directorships were outlawed, and the individual companies that made up the zaibatsu were made independent entities. Complete dissolution of the zaibatsu was never achieved by Allied reformers, mostly because, in an effort to reindustrialize Japan as a bulwark against Communism in Asia, the U.S. government rescinded the SCAP (Supreme Commander of the Allied Powers) orders to deconcentrate Japan’s large companies. Individual companies began associating in “enterprise groups” (kigyo shudan), organized around leading companies or major banks. The cooperative nature of these groups became a major factor in the rapid economic growth of postwar Japan, as they pooled their resources to invest in developing industries. Though large industrial conglomerates continue to exist in Japan, the vertically-integrated chain of command of the zaibatsu, has now widely been displaced by the horizontal relationships of association and coordination characteristic of “keiretsu” (系列, meaning “series” or “subsidiary”).
History and Significance
The term zaibatsu was used in the nineteenth century and the first half of the twentieth century to refer to large family-controlled banking and industrial conglomerates in Japan. While the term was used arbitrarily in the United States throughout the 1980s to refer to any large Japanese corporation, it is not used by native Japanese speakers for anything other than historical discussions in reference to Edo- and Meiji-era zaibatsu.
A zaibatsu was usually organized around a single family, and might operate companies in all the major areas of economic activity. All zaibatsu owned banks, which they used to mobilize capital. The Mitsui zaibatsu, for example, owned companies or invested in banking, food processing, foreign trade, mining, insurance, textiles, sugar, machinery, and many other areas. The leading zaibatsu were Mitsui, Mitsubishi, Dai Ichi Kangyo, Sumitomo, Sanwa, and Fuyo.
The “Big Four” zaibatsu (四大財閥, shidai zaibatsu) of Mitsubishi, Mitsui, Sumitomo and Yasuda are the most historically significant zaibatsu groups, with roots stemming from the Edo period of Japanese history, but there were also many smaller concerns. During the Edo and into the Meiji periods, the Tokugawa shogunate made use of their services and financial power, often free of charge, to carry out various endeavors, in exchange for the privilege of using government funds. The oldest zaibatsu, the house of Mitsui, had been run by merchants since 1616, when its samurai founder began brewing sake and soy sauce. Most of the other zaibatsu developed after the Meiji Restoration of 1868, when the government began to actively encourage economic growth and industrialization with subsidies, privileges and favorable tax policies. The zaibatsu founders were not wealthy merchants, but samurai bureaucrats with long-established contacts in the government, which enabled them to secure lucrative monopolies, subsidies, and greatly undervalued state assets when the government sold off state industrial properties during the 1870s. The zaibatsu helped to finance strategic semiofficial enterprises in Japan and abroad, particularly in Taiwan and Korea. For example, Yataro Iwasaki, founder of Mitsubishi, was given a subsidised shipping monopoly in return for his help ferrying troops to Taiwan during a military expedition in 1874.  In the early 1930s, an attempt by the military clique to break the economic power of the zaibatsu failed. By 1937, the four leading zaibatsu directly controlled one third of Japanese bank deposits, one third of all foreign trade, one half of Japan’s shipbuilding and maritime shipping, and most of the heavy industries in Japan. They maintained close relationships with the major political parties.
After the Russo-Japanese War, a number of “second-tier” zaibatsu also emerged, mostly as the result of business conglomerations. Some more famous second-tier zaibatsu included the Okura, Furukawa, Nakajima Aircraft Company, and Nissan groups, among several others. The zaibatsu grew most rapidly during the early twentieth century, particularly during World War I when Japan’s limited involvement in the war gave it industrial and commercial advantages.
After Japan’s surrender (1945) in World War II, the breakup of the zaibatsu was announced as a major aim of the Allied occupation. Their controlling families’ assets were seized, holding companies (the previous “heads” of the zaibatsu conglomerates) eliminated, and interlocking directorships, essential to the old system of intercompany collaboration, were outlawed. Stock owned by the parent companies was sold, and the individual companies that made up the zaibatsu were made independent entities, although the management within each company remained largely unchanged. Among the zaibatsu that were targeted by the Supreme Commander of the Allied Powers (SCAP) for dissolution in 1946 were Asano, Furukawa, Nakajima, Nissan, Nomura, and Okura. Matsushita Electric Industrial Co., Ltd., though not a zaibatsu, was originally targeted for breakup, but was saved by a petition signed by 15,000 of its trade union workers and their families.
After the signing of the peace treaty in 1951, individual companies began associating in “enterprise groups” (kigyo shudan), organized around leading companies or major banks. They differed from the previous centralized zaibatsu in that their collaboration was more informal, and the financial interdependency among the member companies was limited. The cooperative nature of these groups became a major factor in the rapid economic growth of postwar Japan, as they pooled their resources to invest in developing industries.
Complete dissolution of the zaibatsu was never achieved by Allied reformers or SCAP, mostly because, in an effort to reindustrialize Japan as a bulwark against Communism in Asia, the U.S. government rescinded the SCAP orders to deconcentrate Japan’s large companies Zaibatsu as a whole were widely considered to be beneficial to the Japanese economy and government. The Japanese public, zaibatsu workers and management, and the entrenched bureaucracy were unenthusiastic and disapproving of plans to dissolve the zaibatsu. The change in the political focus of the Occupation during the reverse course crippled efforts to eliminate the zaibatsu.
Today, the influence of the zaibatsu can still be seen in the financial groups, institutions, and larger companies whose origins reach back to the original zaibatsu, often sharing the same original family names (for example, Sumitomo Mitsui Banking Corporation). However, some argue that the “old mechanisms of financial and administrative control” that zaibatsu once enjoyed have been destroyed. Though large industrial conglomerates continue to exist in Japan, the vertically-integrated chain of command of the zaibatsu, culminating in control by a single family, has now widely been displaced by the horizontal relationships of association and coordination characteristic of keiretsu (系列, meaning “series” or “subsidiary”).