Abstract: By standard economic logic, the governance systems that successful firms adopt should (on the more substantial aspects) tend to converge over time. In this paper, I investigate one of the ways in which Japanese corporate governance is said not to converge with U.S. governance: cross-shareholding arrangements. I find evidence for four propositions, all of which suggest that standard economic principles -- independent of any differences in social context -- largely explain Japanese shareholding patterns. First, the pre-war zaibatsu functioned largely as venture capital firms. Second, the cross-shareholding among the non-functional firms in the keiretsu is trivial. Third, the cross-shareholding among the financial firms in the keiretsu is an artifact of insider trading. Last, the cross-shareholding among firms in the automobile industry is a means of controlling opportunism in the presence of relationship-specific investments (as predicted by Klein, Crawford & Alchian and Gilson and Roe).