Japanese Fever

Japan's two biggest steelmakers -- Yawata Iron & Steel and Fuji Iron & Steel -- are in the process of merging into a colossus that will produce some 22.3 million tons of steel a year and rank second in the world only to U.S. Steel (30.9 million tons). The automaking di vision of Mitsubishi Heavy Industries is being combined with the truck-making Isuzu Motors to form Japan's third largest automaker, after Toyota Motor Co. and Nissan Motor Co. Other mergers are afoot in petrochemicals, electric equipment, heavy machinery, banking and shipbuilding.

All of these are part of a merger fever that is running through the Japanese industrial establishment. Shozo Hotta, head of Osaka's big Sumitomo Bank, says: "There is no doubt that a full-scale reorganization of business is now in progress."

Bigness is by no means new to Japanese industry. The merger trend began with the reconsolidation of some of the old zaibatsu -- powerful family cartels that once controlled nearly all of Japanese business, and were broken up during the U.S. postwar occupation. Three parts of a famed zaibatsu, Mitsubishi Heavy Industries, were rejoined in 1964 to form what is Japan's third largest corporation. But the current mergers are not so much part of the old cartel systems as symbols of Japan's new concern over strong foreign competition.

Not so Neurotic. The country's astonishing postwar recovery--Japan last year achieved a $114 billion gross national product, ranking only after those of the U.S., Russia and West Germany --has been nurtured in a sort of industrial hothouse, where government controls have fended off competing goods and capital from abroad. Now, under pressure from Japan's world trading partners, the government has begun the first of several "liberalization" steps to knock down barriers to foreign capital.

Some Japanese businesses say the rush of financially healthy companies toward new partners is the result of a "merger neurosis." Others think that it is not neurotic at all. "The time is ripe for mergers," argues Yawata President Yoshihiro Inayama, 64. "Intensification of international competition makes it imperative for Japanese firms to strengthen their internal structures."

In a country where monopoly has never aroused much concern, the government can be expected to back the trend. Japan's Fair Trade Commission, which was set up under vague antitrust laws enacted at U.S. behest during the Occupation, has yet to rule against any major merger.

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