Question

Focus on the difference between the U.S. and Japanese financial markets and how the Japanese markets make high financial leverage more attainable than that possible for U.S. firms. Please provide some research and respond with accurate Citation and Reference.

Answer 1

A) Yes Japanese companies are highly leveraged when compared to U.S. As Japanese companies are leaders in high technology in their industries, their governments support them. This pursuit of technology enables them to use high fixed costs. Generally Japanese companies donot layout their workers as U.S companies. So the debt to equity ratios of Japanese companies are generally 2 to 3 times more than those of the United States. The major point here is credit is more available in Japan due to the traditional relationship between the industrial firm and its banks.

In general Japanese workers seems to be more loyal to employee when compared to U.S workers who are loyal to themselves and their family (As per article link given below). So it allows Japanese companies to spend more on workers which increase their costs (Fixed and variable). Due to all the above reasons Japan companies are more leveraged than U.S. Japan companies are also more competitive due to these reasons.

Note: The question itself is a generalized one. So the links are given below and major point in the question is answered

Links:

http://themarketplaceoflife.blogspot.in/2011/02/leverage-in-japan-and-in-america.html

Article link

http://maaw.info/ArticleSummaries/ArtSumMartin92.htm

On the other hand Japanese workers are also more loyal to employee than U.S workers who are more loyal to themselves and their family (As per article in which reference is pasted below). This can enable companies to spend

more for employees which also increases costs. Due to this reasons Japanese companies use more fixed and variable costs and they are more leveraged.

Note: The question itself is generalized one. So the important point from articles is taken to explain the main reason.

http://themarketplaceoflife.blogspot.in/2011/02/leverage-in-japan-and-in-america.html

Article Link

http://maaw.info/ArticleSummaries/ArtSumMartin92.htm