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December 8, 2005 5:06 pm

Shades of old Japan live on

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Two former enemies – Hiroshi Mikitani, the president of internet company Rakuten, and Kenichiro Kidokoro, director at Tokyo Broadcasting Systems – will meet face-to-face this weekend to discuss details of the truce that ended their bitter seven-week battle for control of TBS.

The rapprochement marks the end of the dispute that developed after Mr Mikitani acquired a large stake in TBS and threatened a hostile takeover unless the broadcaster agreed to merge with Rakuten. It was the second such deal in Tokyo this year after a similar move by Livedoor, another internet firm, to take over Fuji Television.

Taken together, these two hostile approaches by Japanese companies against their compatriots have helped create the impression that a more aggressive, home-grown style of capitalism is emerging in Japan.

The online nature of the aggressors gave Japan’s hidebound corporate world a taste of Silicon Valley in the 1990s. And the fact that the predators have their head offices in Japan’s swankiest office building, Roppongi Hills, added to the sense there was a new, technology-savvy silo of sharp-minded capitalists emerging who were eager to reshape Japan.

The characters involved did nothing to undermine this image. Takafumi Horie, Livedoor’s president, is a youthful, spiky-haired cultural iconoclast with a taste for T-shirts and jeans rather than suits and a habit of stating his mind and suffering the consequences.

Hiroshi Mikitani, president of Rakuten, is more conservative than Mr Horie, but unconventional all the same. He formed Rakuten after taking the highly unusual decision to quit a job at the Industrial Bank of Japan.

In both style and execution the two deals symbolised the way in which Japan was casting off years of tradition and evolving a more westernised model of corporate behaviour. But ultimately, both deals have failed to live up to their revolutionary promise.

As it turned out, quiet negotiation and the behind-the-scenes influence of an elderly business elite have determined the outcomes of both – a far cry from the swagger that characterised them at the outset. “At the end, both sides realised anything other than a compromise was not going to be constructive,” said Hiro Hirano, chief executive of Nikko Principal, a private equity company that was involved in the Rakuten deal.

Livedoor’s attempted move on Fuji TV ended after a blaze of criticism from Japan’s business elite bullied both sides into a compromise shareholding agreement, peppered with vague promises of future co-operation.

Mr Horie changed out of his T-shirts and appeared at a press conference in a sober suit, tempered his language and sought to behave in a manner more befitting a Japanese businessman.

Since the deal was forged, there have been few concrete signs of collaboration, although they have announced a joint wireless local area network. “Both companies are essentially doing exactly what they were doing before,” said one banker.

Rakuten’s move on TBS reached a similarly conformist denouement. As the public temperature surrounding the deal rose, the two companies’ initial ardour cooled and they agreed to set up a joint committee to consider future tie-ups. Rakuten agreed to transfer half its TBS stake to a trust bank and withdraw its demand for a full merger.

“If we had continued the showdown, it might have damaged our brand image,” said a senior executive at one of the companies involved. “So we had to find an amicable solution – that was the bottom line.”

This deal was brokered in a distinctly old-Japan fashion by two senior figures in the banking industry – Yoshifumi Nishikawa, the former head of SMFG, Japan’s third largest bank; and Hiroshi Saito, president of Mizuho Corporate Bank.

What began with two brash internet firms looking to take on Japan’s business establishment became a triumph of compromise over confrontation.

There is plenty to suggest that Japan’s corporate landscape is changing, particularly the recent increase in domestic M&A activity . But the way in which its two most high-profile deals this year were resolved reveals that, under pressure, Japan’s new-style capitalists can look a lot like the old ones.

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