Monday, May 11, 2015

Minomura Rizaemon and the Survival of Mitsui

Suruga Street with Echigoya in the left
(Today: the Right side is occupied by the
Mitsui Main Building)
Japan faced an economic transformation after the 1860’s. She pursed the path of transformation from an agricultural medievalist country to an industrial, modern, and westernize country. Many business had to adopt to the situation or face bankruptcy, which happened to many old enterprises. But some merchant houses succeeded to transform. They did not just survive but they grew to become powerful conglomerates know as Zaibatsu. The biggest of this Zaibatsu was the House of Mitsui that flourished under the management of Minomura Rizaemon. 

Minomura was Mitsui’s secret to their success during the Meiji Restoration. Born on Novermber 25, 1821, Minomura came from a samurai family. His father was a ronin or a samurai without a master. Thus, they lived in poverty. At a young age, Minomura travelled to Kyushu and Kyoto before returning to Edo (modern day Tokyo). At the age of 19 he worked as an apprentice of Oguri Kozukenosuke, the last finance minister of the rapidly weakening Tokugawa Shogunate. Oguri had a transaction with the House of Mitsui. During one of their meeting, the Mitsui took notice of Minomura. They saw his skills in negotiation and his hard work. Eventually, in 1866, the Mitsui hired Minomura in 1868. Minomura, with his hardwork and with his connections to the government both in the Tokugawa and the Meiji led to his quick rise in Mitsui, later becoming its general manager and ultimately got adopted by the family.

When the Meiji Restoration began in the 1870, Mitsui faced a problem after centuries of prosperity and traditions. Hachirobei Takatoshi Mitsui (1622 – 1694) founded the House of Mitsui in the 17th century under the Tokugawa Shogunate. It prospered with its trading business. At the time when, Tokugawa isolated Japan, domestic trade intensified, and the House of Mitsui cashed in. From their prosperity came literally a family institution. In a sense, it was a rustic family corporation. It had a patriarch coming from the branch of Mitsui that served as the executive of the trading house. With the patriarch also came the family council or the omotokata. The omotokata formed by the founding clans of the House. The family, in overall, operated like a state, complete with a constitution and laws that pertained to different matters such as resolving conflicts between family members and the issue property ownership and divorce. Once a representative of a clan passed away, the position fell to the late representative’s eldest son. Younger siblings, on the other, continued to serve in the house either as a manager or a businessman who wanted to start their own enterprise. Although Mitsui operated like a family business, it opened its doors to able, competent, and efficient individuals. They either adopted the manager or had them marry to a Mitsui daughter. Mitsui prospered tremendously during the Tokugawa Era, however, when the Meiji took power, economic situation changed. Most of the houses saw their trading business falter as importation began to rise.

While many old mercantile houses faltered Mitsui managed to avoid such fall with the help of Minomura. During the Boshin War, Minomura and other Mistui family members made a right direction to support the Meiji Government. As a result of their support, Mitsui gained special privilege from the government which include monopoly rights, subsidies, and contracts. And Mitsui was lucky to get such privilege along with Ono and Shimada. They gained contracts, like supplying the army with provisions and handling the logistics. Minomura as part of the transition, sent 5 Mitsui family members and 2 staff members to the United States in order to study modern business and corporate management. And as they returned, he had them work and apply their knowledge to the management of Mitsui. He also moved the headquarters of the House of Mitsui from Kyoto to the center of the economy – Tokyo – to the dismay of the people of former location.

As part of the transition to a modern corporation, Minomura stated that the Mitsui Group properties and assets belonged to the group and not just to the Mitsui family members and relatives. Hence, he implied that every part of the Mitsui Group from the top up to the lowest ranking worker in the company owns and thus must work hard for the continuity and prosperity of group.

Mitsui continued to diversify in the 1870’s. In 1875, Minomura bought for Mitsui a trading company owned by a later prominent Meiji official named Inoue Kaoru. The trading company became known as Mitsui Bussan. With the support of Inoue and other officials connected to Minomura, it gained the right to sell coal from government-owned mine to abroad. It also became known as a middleman for the importation of machinery from the west, vital to the industrialization of Japan.

Mitsukoshi became also one of Minomura’s success story. At the start of the Meiji Restoration, Mitsukoshi, then known as Echigoya, suffered huge losses thanks to the growing competition from imports and other trade houses. Minomura handled the situation in a radical way. He had Echigoya separated from the Mitsui House into an independent entity and given the management to a Mitsui member. With the store separated from the group, the management could move freely and make changes deemed appropriate and necessary. The decision paid off. The store rose to become one of Tokyo’s best stores by the dawn of the new century.

Mitsui Bank remained as Minomura’s greatest legacy to the House of Mitsui. Founded in 1876, Mitsui Bank emerged as the first private bank in Japan. It had a capital of   over ¥2 million with over thirty branches across the Japan. It offered wide range of services like deposits, money changer, and credit. The foundation of Mitsui came from the past experience of Mitsui in finance. In 1869, it took leadership of the Trading and Exchange Companies, a government-sponsored enterprise. Mitsui also managed the Osaka Mint. And in 1871, it took a joint-venture with the House of Ono to establish the First National Bank of Japan. From these experiences, Mitsui and Minomura gained knowledge which led to the foundation of the Mitsui Bank. And Minomura served as its first President.

With Mitsui Bank, the Mitsui Group managed to diverse into different ventures. It managed to invest in mining and international trade. And by the end of the century, Mitsui emerged as the biggest Zaibatsu or conglomerate in Japan. However, Minomura did not lived to see the growth of Mitsui. On February 21, 1877, at the young age of 56, the reformer of the House of Mitsui passed away. His greatest legacy remained the survival of Mitsui and building up its foundation leading to its emergence as the biggest conglomerate in Japan.

See also:

Bird, Allen. "Minomura, Rizaemon." in Encyclopedia of Japanese Business and Management. Edited by Allan Bird. New York, New York: Routledge, 2002.

Fairbank, John et. al. East Asia: Tradition and Transformation. London: George Allen & Unwin, 1973.

Morck, Randall (ed.). A History of Corporate Governance Around the World: Family Business Groups. Chicago, Illinois: Universtiy of Chicago Press, 2007.

Hirschmeier, Johannes & Yui, Tusenehiko. The Development of Japanese Business: 1600-1973. Abingdon, Oxon: Routledge, 2006.

Rosovsky, Henry & Kumon, Shumpel (eds.). The Political Economy of Japan, v. 3: Cultural and Social Dynamics. Stanford, California: Stanford University Press, 1992.

Yamura, Kozo (ed.). The Economic Emergence of Modern Japan. New York, New York: Cambridge University Press, 1997.

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