Global Steel Trade; Structural Problems and Future Solutions

features of the Japanese economy well after the country’s development. By the 1990s, the days of officially
sanctioned cartels were over, but by most accounts industry coordination remained in place. As one
observer noted in 1998, “These days, ‘administrative guidance’ and the power of industry associations
produce the same results as formal cartels.” 26 An increasing number of steel experts openly recognize a
cooperative system as a basic part of the industry’s structure (see box). 27
Many experts note the continued connection between industry cooperation and the maintenance of longterm
excess capacity in the late 1990s. One prominent Japanese steel expert noted, in an interview for this
report, the tendency toward surplus capacity due to the long-standing absence of competition and market
exit. In particular, he indicated that the current production and capacity levels in the integrated sector are
most likely greater than the levels that would result if Nippon were to compete fully with the other
producers. If exposed to open market competition, according to this expert, one or more of the top five
Japanese steel companies would likely be forced out of business. 28
Industry Observers Commonly Refer to Collaboration Among Japanese Producers
The recognition of longstanding collaboration among major Japanese producers as a basic
characteristic of the industry has become increasingly widespread in recent years. Professor Hiroyuki
Itami of Hitotsubashi University, a recognized expert on the steel industry in Japan and the chairman
of the committee that prepared a 1999 MITI-sponsored study on basic materials industries (including
steel), has written about cooperation among major steel producers in a recently published book.
Professor Itami comments that shortly after Nippon Steel’s formation, production shares “come to a
standstill. They are horizontal lines.” In an interview for this study, Professor Itami stated that the
“cooperative system” among the five major integrated producers has continued in place to the present
day. While stopping short of calling this system a formal cartel, he discussed the sharing of production
and other information among such firms, via industry associations. Professor Itami’s recognition of the
longstanding existence of the “cooperative system” is consistent with other Japanese industry
sources interviewed for this report.
The increasingly open recognition of long-term collaboration among integrated producers comes on
the heels of a growing literature by scholars and journalists who have written extensively on the
structure of the Japanese industry in the late 1990s. These include Professor Naoki Tona (who refers
to a “cooperative structure which can be called a horizontal cartel”); Richard Katz (referring to an
ongoing “steel cartel” among major integrated firms); Professor Mark Tilton (who discusses the “steel
cartel” in a book on cartels in Japan’s basic materials industries); and The Economist (which refers to
a “steel cartel” as of November 1999).
The acknowledgment of coordination among producers also extends to the Japanese press. The
leading Japanese business publications Nihon Keizai Shimbun and Nikkei Sangyo Shimbun both write
openly about collaboration among major producers through the late 1990s. The Nikkei Sangyo
Shimbun, in detailing long-standing collaboration on production levels among major producers, has
listed the production shares traditionally held by each company down to a tenth of a percent. The
Nikkei Sangyo notes in particular the oddity that, “Despite the fact that Kawasaki Steel and Sumitomo
Metals both were producing more than 10 million tons annually, there had been no more than a
30,000-ton gap between them for quite some time.”
While views on coordination among integrated producers are not completely unanimous (Professor
Robert Uriu of Columbia University, for instance, is of the opinion that cooperation among major
Japanese producers was curtailed in the 1990s due in part to pressure from customers), there is
extensive support—in terms of both data and industry knowledge—for the coordination viewpoint.
Even a single percentage change in production share, such as occurred after the export surge in late
1999, is a source of extensive commentary among industry experts looking to determine the future
level of collaboration on production decisions within the industry.
72 Global Steel Trade: Structural Problems and Future Solutions