World Economic News

Japan Moves To Loosen Restrictions on Cartelization

As the financial locusts are welcomed into Prime Minister Junichiro Koizumi's Japan, the Trade Ministry is trying to loosen restrictions against cartelization. The current law on mergers and acquisitions (M&A) restricts post-merger companies to 35% of market share in any industry, but the Trade Ministry is pushing to up that to 50%, "to respond to global competition," according to Ministry director Keisuke Sadamori. Such cartelization, described as necessary to "respond to global competition," recalls the zaibatzu of pre-war Japan, broken up under MacArthur.

The context today, however, is the invasion of the hedge funds. Thompson Financial reports that private equity funds put $4.9 billion into Japanese M&A's in the first half of 2006—far below the figures in the U.S. and Europe, but huge by Japanese standards, and growing. Writes Nikkei on July 11: "With the economy returning to normalcy, as shown in the Bank of Japan's expected termination of its zero interest rate policy, private equity funds anticipate corporate M&A activity comparable to those in the U.S. and Europe." Nikkei also notes, however, that "with interest rates being hiked globally, concerns are growing that the investment fund bubble may burst in the near future."