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Japan Trading Companies
A major Japanese innovation in international trade has
been the
development of large integrated general trading companies.
These
corporations were first organized during the late
nineteenth
century as part of the effort to replace the foreign
companies
dominating Japan's trade and to provide foreign marketing
services
to Japanese firms unfamiliar with the outside world.
At first, trading companies acted as specialized
wholesalers
for Japanese manufacturers in domestic and foreign markets
and
bought raw materials and other inputs for manufacturing
operations.
Later, trading companies also served as financial
intermediaries,
absorbed foreign exchange risk for their customers,
provided
technical advice to small firms whose products might be
exported,
and engaged in direct investment overseas, often to secure
stable
sources of supply.
After World War II, the trading companies developed
some thirdcountry trade, some of which did not involve Japanese
products or
firms. Such transactions included arranging for the sale
of a
United States chemical plant to the Soviet Union and for
the
importing of Romanian urea into Bangladesh. By 1988 such
offshore
trade accounted for almost 20 percent of total sales of
the nine
largest trading companies in Japan.
In the 1980s, several thousand trading companies
existed in
Japan. The top nine companies, however, accounted for the
bulk of
the transactions. In fiscal year
(FY--see Glossary) 1991,
C. Itoh
led with sales of ¥20.0 trillion, followed by Sumitomo
(¥18.8
trillion), Marubeni (¥18.2 trillion), Mitsui (¥16.2
trillion), and
Mitsubishi (¥15.7 trillion). Others in the top nine were
Nissho
Iwai, Tomen, Nichimen, and Kanematsu-Gosho. These
companies were
very important in Japan's foreign trade. In 1988 they
together
handled 42 percent of exports and 74 percent of imports.
These companies were best at handling large-volume bulk
products, such as raw materials. They faced some
difficulties in
the 1970s and 1980s with fluctuations in international raw
material
markets, but they continued to play a very important role
in
Japan's international trade. During the 1980s, they
increasingly
acted through direct investment.
Data as of January 1994
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