JAPANESE GIVE THE CHOP TO FORMER ALLIES
The close-knit relationship between Japanese corporations and their main banks is showing signs of collapse. Dealing banks are being sacked by their foremr dependents in increasing numbers.
The contributing factor behind the startling change to the framework of Japanese industrial society is financial deregulation. Japanese business corporations have been gaining access to a broader range of financial instruments and funding opportunities in the world capital market. They have also sharpened their skills in treasury management and improved their efficiency in international cash management. These have helped to build up large cash surpluses and to boost corporate profits.
And these profits are not being used for investment in new plant and equipment, nor being passed on to employees in the form of wage increases. They are being reinvested in overseas financial instruments which yield much higher returns than those in the domestic market.
In the days of Japan's high economic growth during the 1960s and early 1970s, or during the period of tight credit, Japanese corporations, suffering a chronic shortage of funds, depended heavily on the banks for the bulk of their loans. But now, corporate treasurers are showing how much they have reduced funding costs by discarding their dealing banks.