Nippon Steel
Corporate History & Strategy

It was in July 1966 that I proposed the 'Two Great Steelmakers East and West' concept, but in truth, I had the merger with Yawata in mind all along. Instead of saying 'Yawata-Fuji merger,' I used the phrase 'two great steelmakers' as a trial balloon. Steel capacity adjustments are a perpetual source of friction. And as blast furnaces are built one after another, market prices fall. I spoke out of a feeling that something had to be done. I wanted to see how the public would react. (...)

Without a critical mass of people who had (during the wartime era) eaten from the same pot at Japan Iron & Steel, this merger could not have happened. If either I or Inayama had been absent, this merger would not have been possible.

Ninety active modern economists including Ryuichiro Tachi, Ryutaro Komiya, Tadao Uchida, and Masahiro Tatémoto have issued an opinion paper opposing recent large-scale mergers including the Yawata-Fuji merger, causing ripples not only among the merger parties but across government, the business community, and the Fair Trade Commission.

The opinion paper does not use the words 'oppose the merger,' but its contents and survey results are permeated with severe criticism. What it emphasizes most strongly is a warning that 'competition among enterprises has served as a driving force of Japan's postwar economic development, and if the Anti-Monopoly Act were to be amended or rendered meaningless to restrict competition or permit private monopoly, the engine of the Japanese economy would ultimately decline, and its sound and democratic development going forward would face grave obstacles,' expressing a deep sense of crisis about the future of the Japanese economy. (...)

The opinions coming from the government, business community, and government advisory bodies are all uniformly in support of the merger, and given the serious risk that this could distort both the importance of large-scale mergers for Japan's economic future and the fair judgment of the JFTC, the organizers say they 'felt compelled to act,' explaining the motivation behind releasing the opinion paper.

(1) While the role played by the ideal of free and fair competition among enterprises in contributing to the democratization and development of the Japanese economy should naturally be acknowledged,

(2) On the other hand, given the remarkable changes in socioeconomic realities and the international environment today, including the progress of capital liberalization, the emergence of giant global enterprises, and the necessity of fostering so-called systems industries requiring broad integration of technology and industrial capabilities, the numerous deficiencies that have arisen in the current legal framework in response to these new circumstances cannot be overlooked.

(3) Therefore, if the current Anti-Monopoly Act system is maintained as is, there is concern that it will become an obstacle to the restructuring of Japan's industrial configuration and future economic development as it seeks to adapt to the demands of the new era. (...)

The fact that law enforcement is often left to the insular judgment of the Fair Trade Commission means that important guidelines for industrial economics are sometimes swayed by the rigid views of the JFTC, and this constitutes a matter of national governance concern that must be rectified.

Among postwar economic issues, few have captured the public's attention as intensely as the Yawata-Fuji merger. From the moment Presidents Inayama of Yawata and Nagano of Fuji Steel indicated their intent to merge in April 1968, public opinion boiled over and scholarly debate flared fiercely over the propriety of the merger and the application of the Anti-Monopoly Act.

The business community sought to use this merger as a challenge to the Anti-Monopoly Act and a breakthrough for industrial restructuring, large-scale mergers, and the transition to an oligopolistic economy. The government, meanwhile, took a supportive posture through cabinet agreements welcoming the birth of a bona fide world-class enterprise in the era of internationalization.

On the other hand, a group of modern economists rose in opposition, arguing that the merger's realization would deal a fatal blow to the competition maintenance policy enshrined in the Anti-Monopoly Act and undermine the sound growth capacity of the Japanese economy. The JFTC labor union, too, motivated by a sense of mission as guardians of the Anti-Monopoly Act, took the unprecedented step of petitioning the Fair Trade Commission for strict enforcement—also an extraordinary move. Woven between these positions were the concerns of small and medium enterprises fearful of the mammoth's power and the voices of consumers worried about the emergence of administered prices from giant industry.