Lack of corporate governance since the bubble economy and its burst has caused many scandals related to corporate management in Japan, leading to a considerable reduction in Japanese competitiveness. Such of governance has a direct bearing on the malfunctioning of Japanese financial system based on the main bank system. Lack of corporate governance in established companies has been caused by the loss of the monitoring functions by main banks of corporate management. Nonexistence in Japanese financial system of the functions of monitoring management while taking risks has led to the lack of governance in startup companies. Enhancement of internal control is essential to overcome the lack of governance in the established companies. More specifically, strengthening of supervision by the board of directors and establishment of holding companies will be feasible. The reinforced board of directors (or holding company) will have to serve as a node to link shareholders and the actual operations of a company.