Social norms strike back: why American financial practices failed in Japan

Moody's and Standard & Poor's, the major American credit rating agencies, were expected to outcompete and overwhelm the local agencies in Japan during the 1990s. The local Japanese rating agencies were widely understood to be compromised by their links to government and banks. Why have the influences of the American agencies in Japan diminished, while the local Japanese agencies survived? We emphasise the concept of ‘systemic support’ as a solution to this puzzle. Our broadened definition of systemic support incorporates dominant elites’ support and protection of subordinates in exchange for loyalty and obedience. We argue Japanese society's anti-liberal, anti-free market norms (epitomised by systemic support) are a form of counter-hegemony, and this has resisted American financial hegemony and prevented capitalist dominance from severing long-term social relations (including management-labour alliances). Credit rating in Japan is an ideational battlefield between the market liberalisation and anti-free market camps within the Japanese elite. The American agencies’ market friendly, short-term profit-seeking mental framework clashes with the continuing attachment to systemic support in Japan. Similar conflicts can be witnessed in other constrained market economies in Asia and Europe, where corporate bailouts often occur, and local agencies compete against the American majors.