ABSTRACT
This chapter presents facts on Japanese business. Business units typical of the nineteenth century were those owned by individuals or a small group of persons. They were managed by the individuals themselves or by those directly appointed by them. Their management scale was determined by the size of personal assets of those individual owners. The best-known feature is that, in postwar period, Japanese businesses have very heavily relied on borrowings in their finances. This is the so-called indirect financing method. In this way, Japanese firms grossly violate the well-known principle of corporate finance that equity should not be less than debt (the 50% rule of the equity-asset ratio). In order to clarify the characteristics of the capital structure in postwar Japan, we must understand the economic significance of the 50% rule of the equity-asset ratio and the 200% rule of the liquidity ratio. The chapter discusses how to measure the economic power of big business.
