It's one of the biggest remaining vestiges of Japan Inc's coughing, wheezing business model -- the idea that size matters most.
The bigger-is-better doctrine is dominating business decisions the world over. Look no further than the US, where giants like AOL Time Warner Inc have been created amid such thinking. In Japan, however, size is no longer about global domination and economies of scale, but survival.
While the impulse long has been there, Corporate Japan is seeing an unusual rush to become "too big to fail" in recent years. An odd trend, perhaps, but not when you consider Japan's economy is more in touch with socialism than capitalism. The idea is to make yourself so big that the government couldn't allow you to fail. Call it bailout insurance.
Mizuho Holdings Inc, a company that's getting lots of headlines these days, is a glaring example of the survival-of-the-biggest strategy oozing around Japan. It's also a reminder of why some companies that become too big to fail also may be too big to succeed. Moreover, Mizuho's troubles are a microcosm of those undermining the world's second-biggest economy.
Fuji Bank Ltd, Dai-Ichi Kangyo Bank Ltd and Industrial Bank of Japan Ltd combined 18 months ago to form the world's biggest financial group. From the outset, it wasn't a merger of common strengths but weaknesses. The normal M&A buzzphrases like "synergy" and "the sum being greater than its parts" hardly applied. Joining hands was about staying afloat. Period.
And so now it's the Japanese consumer -- experiencing disrupted transactions -- who's paying the price for a bungled merger. Legislators summoned Mizuho President Terunobu Maeda to explain an episode that Standard & Poor's described as an "operational fiasco." Mizuho's automated teller machines failed, transactions were disputed or delayed, payments didn't get there and charges were posted twice. Few ever thought such things could happen here.
Admitting regulators were caught flatfooted, Minister for Financial Services Hakuo Yanagisawa said: "I used to think operational risk wasn't a big issue here in Japan, though it's a big issue elsewhere." Now he knows it's a big issuer here, too.
Japanese executives have never been particularly adept at taking their consumers' pulse, and Mizuho President Maeda proved no exception. With a straight face, he told lawmakers "there was no actual harm done" by his company. Outrage among legislators prompted Maeda to rethink his position and apologize for his lack of apology.
In fact, Mizuho has done actual harm, and it's done so in a particularly vulnerable area: consumer confidence. It used to be that when all else looked grim, Japanese could take pride in two world-class industries: food and banking. Not anymore. Food poisoning and meat-labeling scandals at Snow Brand -- and news of impropriety by assorted other food producers -- dented the belief that Japanese brands were best and safest. Now comes the revelation that some of Japan's fabled banks aren't just insolvent, but incompetent, too.
Consumers are already worried about the banking industry.
Only recently did Japan squeak by the end of another fiscal year on the verge of a banking crisis. The government this month also eliminated its blanket insurance on time deposits at banks, leaving households even more exposed to the nation's financial troubles.
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