Our growing trade deficit with Japan and the deteriorating competitiveness of many of our industries vis-a-vis their Japanese counterparts have provided motivation for a number of comparative studies of U.S. and Japanese firms in recent years. This study compares the financial characteristics of U.S. and Japanese chemical firms by using the MANOVA (multivariate analysis of variance) method. Our findings indicate that the overall financial characteristics of U.S. and Japanese chemical firms are significantly different. U.S. chemical firms are more profitable. However, the keiretsu system enables Japanese chemical firms to use more financial leverage to boost their return on equity. The keiretsu system also enables Japanese chemical firms to use the just-in-time inventory method more extensively to minimize their inventories.