The Fortune Global 500 list ranks the largest companies in the world, which generate a turnover of 41 trillion. dollars, i.e. equal to one third of world GDP. Traditionally, the list is considered a reliable barometer of developments in the business world, as it has recorded big trends such as the rise of China and the boom of so-called Big Tech. At the same time, Fortune’s list has also recorded the decline of large companies or entire industries as consumer habits change, technology advances and wars break out. This year, looking at the list one can’t help but notice the fall of a country that once dominated global business: Japan.
When Fortune magazine published the first edition of the modern version of the Global 500 list in 1995, Japan’s Mitsubishi had won the top spot, beating out American giants that later became No. 1, such as Walmart and Exxon. At $176 billion, “Mitsubishi’s revenue is greater than AT&T, DuPont, Citicorp and Procter & Gamble combined,” Fortune wrote at the time.
In the same year, in fact, 5 other large Japanese groups had managed to enter the top 10 (they are Mitsui, Itochu, Sumitomo, Marubeni and Nissho Iwai), with Japan counting a total of 149 companies on the list, very close to the 151 of USA. Combined, these companies generated 37% of the Global 500’s revenue.
Today, 28 years later, the picture is very different. As Fortune notes, this year’s Global 500 list includes just 41 Japanese companies, far fewer than companies from the US and China (136 and 135 respectively). The Japanese companies of the Global 500 generated revenue of 2.8 trillion last year. dollars, just 6.8% of the world total. By comparison, US Global 500 companies generated 31.8% of the list’s total turnover and Chinese companies 27.5%.
Toyota Motors is currently the largest Japanese company on the list, in 19th place, with a turnover of 274 billion dollars. As for Mitsubishi? It is now in 45th place, with a turnover of 159 billion dollars.
The reasons of the fall
1. China’s rise in the Global 500, from just three companies in 1995 to 135 today, has seen many Japanese firms sidelined. In fact, Chinese companies are “beating” Japan even in areas where it has traditionally been very strong, as for example China this year overtook Japan to become the world’s largest car exporter.
2. Currency fluctuations partly explain the decline in Japanese companies. The Japanese yen fell from 112 yen to the dollar to 135 yen to the dollar between fiscal 2021 and 2022. That 20% drop weighed on corporate earnings when translated into dollars. And while Japan has traditionally seen the weak yen as boosting the competitiveness of its exports, it also has a more negative side, making imports more expensive. Thus, Japanese companies face even higher energy and raw material costs due to the weak currency.
3. Its economy has stagnated recently, which means there are fewer opportunities for existing businesses and startups. Over the past decade, the Japanese economy has grown by 5.3%, at a time when the US economy grew by 23% and the Chinese economy by 83%. In practice, Japan has been left out of the internet boom that has benefited economies such as the US and China, with the result that the country has no Big Tech companies of its own, alongside Alphabet, Microsoft, Alibaba and Tencent.
4. The Japanese economy is in the absence of economic and structural reforms that would have created new engines of growth, fostering innovation.
