The fish and vegetable market in Wajima has been in pretty much constant operation for the past 1,000 years: a talisman of commercial resilience and a jewel of the Noto peninsula. Today, the streets lie in a blackened expanse of ash and rubble — victims of the huge earthquake, tsunami and fires that so cruelly ushered Japan’s western coastline into 2024.
The disaster serves in part as a reminder, to both Japan and the outside world, of why the country and its companies — more than 30,000 of which are over a century old — are the way they are. And, significantly for investors, of the direction that both may now take.
As the death toll from the January 1 quake rises to at least 73 and civilian and military rescuers race to find survivors, Noto abounds with evidence of the violence that nature can instantly dispense to anyone living atop the seismic Ring of Fire. Collapsed hillsides; fallen homes; roads turned to twisted ribbons; a seven-storey building lying crazily on its side. Ubiquitous mobile phone footage capturing the moment the quake hit illustrates the question that these terrifying events pose: what would you do if everything static and benign suddenly turned kinetic and lethal?
Fortunately, Japan is institutionally, practically and politically able to keep this question in mind long after individuals have returned to their daily worries. As often happens, the 7.6-magnitude quake rigorously tested sea defences, building standards, evacuation plans, emergency systems and other preparations and found the country admirably hardened through grimly earned expertise.
The experiences that have built this remarkable level of preparedness, though, have exacted a price. Japan has focused heavily on protecting itself from the ferocity of nature — in particular by the type of ravages (quakes, typhoons, floods) that can so quickly take everything away.
The survival instinct honed by this way of thinking takes many forms but prominent among them has been the evolution of the Japanese company as a vehicle of survivability. Companies large and small exist to make profits, of course, but they also serve as visible units of permanence in an unstable world. There is a reason that Japan has more century-old companies than any other country (by a giant margin): longevity is an end in itself for businesses so survival is a paramount corporate concern.
In recent decades, the imperative to survive has shaped corporate decision-making, most obviously at Japan’s thousands of listed companies. It has done so in ways that have come to frustrate an ever more vocal generation of investors who would much prefer companies to put shareholder value ahead of everything else.
In the 1970s and 1980s, the received wisdom across corporate Japan was that survivability lay in becoming as big as possible as quickly as possible. Before that, companies had created networks of cross-shareholdings in one another to build protection from potential predators. In the 1990s, after the collapse of the country’s bubble, they began a long era of hoarding, believing resilience would grow from the depths of one’s coffers and a lower reliance on banks. Poison pills and other shareholder-unfriendly strategies evolved to ward off threats to survival, even when those threats were mild.
Now, though, corporate Japan has entered a new episode in which managements have realised that survivability depends on very different strategies. For many that will require a radical shift in behaviour. Conglomerates are increasingly accepting that they must be smaller, and are shedding non-core businesses. Instead of a guarantee of support, the cross-shareholdings are seen as potentially dangerous sources of obligation to another company and are being sold.
Deal bankers and lawyers say a growing wave of domestic merger and acquisition activity attests to a new recognition that, after years of resisting consolidation, it represents the best shot at corporate longevity. Companies that see a threat in listed status itself — with all the perils of greater shareholder scrutiny — are embarking on take-private buyouts at a striking pace.
In Japan’s huge unlisted sector, where some 2mn companies are owned and run by people over the age of 70, survival is under demographic threat. Thousands of those are considering sales of their businesses that would have been unthinkable a few years ago.
Japan’s seismology has helped create a business world that craves permanence. Quite suddenly, companies look more fluid than ever in how they will achieve that.
leo.lewis@ft.com
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