Compared with other countries, Japan's merger boomlet hardly registers. Yet this activity is precisely the reason why Japanese mergers could now take off. Compared with foreign rivals, Japanese companies in a surprising number of industries are now either too small or too dependent on their home market. This gap is widest in banking, telecoms and pharmaceuticals, where mergers among foreign competitors have been the most intense. But it is woefully short of foreign business in a globalising industry, which is why it is chasing IDC, a small international carrier.
Some Japanese banks have big foreign operations.
But they all lack size, which determines how much they can spend on technology, and therefore, increasingly, how competitive they are. Japanese pharmaceutical companies combine both weaknesses. Takeda, whose sales make it the biggest of Japan's drug firms, earns less than a third of the revenues of America's Merck or Britain's Glaxo Wellcome. Garry Evans of HSBC, a British bank, reckons that this year there will be more mergers in the pharmaceuticals industry than in any other. Now other manufacturers are at it too.