Monday, April 7, 2014

Yataro Iwasaki: Founder of Mitsubishi

Yataro Iwasaki
The world in the 19th century had seen the rapid growth of industries and technology. Political changes as well as boundaries changes occurred during this century which would define the following one hundred years. In Europe, new nation were forge by blood or iron. Machinery had replace many manual jobs and increase the supply of once scarce goods. Ideologies, such as communism and socialism, began to appear and questioned the status quo. In Asia, the whole 19th century would be characterize by submission or resistance to the western powers. India had become a jewel in the British crown. The Europeans had sliced into their own colonies the whole of Southeast Asia. In East Asia, resistance to the “foreign devils” became stronger. But some men in the region had envisioned of learning from the westerners and applying those lesson to their own country. This idea became most prominent in the region of Japan, where men like Yataro Iwasaki would build the industries that would lead their Empire to the world stage.

Yataro Iwasaki (1835 – 1885) was a prominent figure in the Japanese business community with his company, Mitsubishi. He was born to a family that was shamed by debt. But his perseverance to study and to work hard, he managed to reclaim the family status and began a journey to success. When events in the national stage favored him, he took the advantage that brought huge wealth and new opportunities.

Yataro Iwasaki was born to a family with a difficult situation. He was born in January 9, 1835 into a family that was below the social strata in the village of Inokuchi under the domains of the Tosa Clan. His grandfather sold their family’s prestigious status of samurai to pay their debts. At a young age, he entered into the service of the ruling clan of Tosa. The Tosa Clan had several business interest in many areas, including the capital of Edo or Tokyo. When he was 19, he was brought by a member of the Tosa Clan to the capital. There, the official was generous enough to allow Yataro to study in Edo.

However, Yataro’s stay in Edo and his education was short lived. A year after arriving in Edo, he received a disturbing news. Back home, his father entered into a conflict with village chief. The struggle led to the beating and injuring of his father. Yataro immediately headed home to care for his father and his family. With the beating of his father, Yataro accused the village chief of corruption and abuse of power. The chief retaliated to Yataro by incarcerating him for seven months in 1856.

Although imprisoned, chances for an education for Yataro continued to arrive. In 1858, a kind fellow of the Tosa Clan, Toyo Yoshida, became a mentor to Yataro. Under his guidance, he received good education. Moreover, with the influence of Yoshida, Yataro managed to climb up to the ranks of the government of the clan.

However, when his patron, Toyo Yoshida, was assassinated in 1862, Yataro was sideline. For five years, he worked in the village. He was placed in charge of managing the farms and the forest nearby. Then in 1867, when, Yoshida’s nephew-in-law came to power, he was back on his job to serve the Tosa Clan.

Yataro had developed a taste for business, and so his craving for business was answered when he was sent to Nagasaki. Nagasaki was a port city bustling with trade between the foreigners and the Japanese. The Tosa Clan had a trading office in the port. Yataro was lucky enough to be assigned into the trading office. In Nagasaki, he had the opportunity to develop his business skill. He was able to trade camphor oil and other Japanese made items and buy weapons, ships, and ammunition. He was also able to establish business connections. With foreigners scouring the city of Nagasaki, most of them were traders interested to get profits by selling their goods. Yataro was able to meet up with some of them. Among his acquaintances was the Scottish trader Thomas Glover. Glover was the contact of Yataro for his weapons trading.

When the three hundred year old Tokugawa Shogunate fell and the Emperor Meiji consolidated his power and began a modernization program, more opportunities for Yataro arrived. Trade intensified in the area of Osaka. Yataro then moved from Nagasaki to Osaka to gain momentum for the trading office. In 1870, a once in a life time opportunity came to Yataro’s life. The Meiji government announced an edict that prohibited clans from engaging in business. Thus, many businesses owned by clans were privatized. Yataro used his saving and bought the Osaka trading office of the Tosa Clan. The Osaka trading office was named Tsukamo Trading Company.

It was in 1873, three years later, however, when Yataro’s worked would be formed and organized. When Yataro was finally recognized as President of the trading company, he renamed the company to Mitsubishi. The name was after the combination of the three leaf crest of the Tosa Clan and the stacked-chestnut-diamond crest of his own family. The fusion resulted to today’s iconic logo of Mitsubishi.

Yataro showed his strong nationalism by providing services to the venture of his government. In 1970’s Japan had eyed territorial expansion in order to gain resources needed for industrialization. Among the territories eyed by the Japanese was the Island Southeast of mainland China – Formosa. When the Chinese Qing Dynasty weakened tremendously in the 19th century, the Japanese was able to assert its dominance and sent expeditions to the island. Yataro, who owned several ships for trade and shipping, lend some of his ships to provided transport for troops during an expedition in 1874. Because of his generous contributions to the ambitions of the Meiji government, he gained favor to several prominent officials like Toshimichi Okubo and Shigenobu Okuma. From the two officials, Yataro received loans and subsidies which would allow him to expand his business even further.

In 1875, he intensified his investments in the shipping industry. He then provided passenger liner services. He intensified as well his shipping liners. He wanted to take over the lucrative Shanghai route that connected the major cities of Yokoma in Japan and Shanghai in China. However, the line was dominated by the American ship liner Pacific Mail. Pacific Mail owned port facilities, warehouses, and off course, numerous ships. Yataro went into conflict against Pacific Mail to gain foothold in the route. He then asked for government’s help. The Meiji government, in the other hand, wanted to expand the shipping industry. With support and patronage from Okubo, he received a generous government loans. The loans allowed Yataro to buy facilities and ships of the Pacific Mail and eventually, bought them out of the line.

As everything was set for Mitsubishi to dominate the route, another competitor entered the game. The British shipping company, the Peninsular and Oriental Steam Navigation began to operate on the route as well. Mitsubishi and Yataro began to engage the British company in a bitter rate war. Yataro slashed his own salary and those of his executives. He also cut wages of workers in order to bring down freight rates. The sacrifice of Mitsubishi employees paid off. By 1876 the British company back down and Mitsubishi dominated the line. In addition, the company became recognized as one of the largest shipping companies or sogo shosha.

As his shipping empire began to materialize and realized, he began to diversify his business portfolio. He began investing in mining and finance. For example, in 1880 he purchased a coal mine in Takashima Island.

In 1877, with his service to the Empire, especially after he provided weapons to the government to suppress the Satsuma Rebelllion, Yataro received the 4th Order of Merit and the Grand Cordon of Rising Sun. It greatly increased the prestige and influence of Yataro.

In 1878, however, another trouble loomed. His biggest benefactor, the influential Toshimichi Okubo was assassinated in 1878. Hence, his greatest patron was gone along with the government subsidies, loans, and favors.  A rival faction rose to power after the assassination. The faction proved to be very distrustful towards Yataro. Yataro became anxious as he felt that he was being placed under surveillance. The government had the right to be fearful of Yataro. By the end of the 1870’s Yataro’s Mitsubishi controlled a huge 73% of Japanese shipping. With this enourmous percentage, the government knew that Yataro could harass them to his will.

To break Mitsubishi’s dominance, the government established its own state owned shipping company, the Kyodo Unyu Shipping Company. Yataro braced for another rate war. He paid all debts to the government to remove any strangle hold. He also upgraded his facilities and ships. He warned for future slashes in salaries in order to engage in another bitter and tough rate wars. However, the rate war never materialized. Instead the state owned shipping company and Mitsubishi’s shipping company merged and formed the Nippon Yusen Kaishi.

After the problems with the state shipping company, Yataro passed away at the age of 50 due to stomach cancer. Mitsubishi would continue to flourish and diversify under his brother and his son’s command.
Bibliography:
Bird, A. (ed.). Encyclopedia of Japanese Business and Management. New York: Routledge, 2002.

“Yataro Iwasaki.” Mitsubishi. Accessed April 5, 2014. http://www.mitsubishi.com/e/history/series/yataro/ 

“Iwasaki Yataro.” NNDB. Accessed April 5, 2014. http://www.nndb.com/people/547/000175022/ 

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