Three Centuries of Japanese Business
John G. Roberts
Table of Contents
Chapter 1—From Sword to Soroban
Chapter 2—Echigoyo the Shunned
Chapter 3—The Source of Happiness is Prudence
Chapter 4—“Remember We Are Merchants”
Chapter 5—Legacy of the Barbarians
Chapter 6—Trade of Blood and Guile
Chapter 7—The Man from Nowhere
Chapter 8—Picking the Winner
Chapter 9—By Appointment to the Emperor
Chapter 10—Foundations in Banking and Commerce
Chapter 11—Capitalism—Japanese Style
Chapter 12—The Zaibatsu Builders
Chapter 13–Diplomacy by Other Means
Chapter 14—The Best Laid Plans
Chapter 15—A Foothold on the Mainland
Chapter 16—The Two Faces of Mitsui
Chapter 17—Which Way to Utopia?
Chapter 18—The Clan in All Its Glory
Chapter 19—Whom the Gods Would Destroy
Chapter 20—Challenging the World
Chapter 21—The Honorable Men in Power
Chapter 22—The Wave of the Future
Chapter 23—Cracks in the Foundation
Chapter 24—Not Necessarily to Japan’s Advantage
Chapter 25—Ashes, Ashes, All Fall Down
Chapter 26—All the King’s Men
Chapter 27—New Wine in Old Bottles
Chapter 28—The Rebirth of Mitsui Bussan
Chapter 29—Behind the Curtain
Chapter 30—Japan Unlimited
Epilogue—The Turning Wheels
Appendix A—Mitsui Constitution of 1722
Appendix B—Mitsui Constitution of 1900
Appendix C—The Mitsui Main Family c. 1900-1945
Appendix E—The Mitsui Group in 1973
At the end of World War II in 1945 Japan was a shambles. Her industrial production had dropped to a mere forty percent, of what it had been at its peak. The whole nation seemed to be in a state of stupor induced by the defeat, as well as by the loss of old beliefs, loved ones, homes, and livelihoods. People were dying of starvation on the streets. It was generally thought that Japan had been reduced to a fourth-rate power. Even the Japanese themselves believed that the chances of regaining their former status as a major world power were nil. Yet once they accepted defeat and its inevitable consequences, they applied themselves singlemindedly to the task of rebuilding their wardevastated land.
No time was lost on self-pity, regret over the mistake of waging a hopeless war, or hatred of the conquerors. With resilience, determination, and accommodation, the nation quickly lifted itself from the ashes of defeat. In the space of a mere dozen years, it achieved the position of leading shipbuilder in the world. In a span of less than a generation, Japan's economic recovery was complete. She became the world's third great industrial power, surpassing the dreams of her most rabid ultranationalists during the heyday of militarism in the 1930s.
Needless to say, the tense and fluid international situation immediately following the war, which was highlighted by the struggle between the Communist and Free Worlds, played an important part in Japan's rapid economic resurgence. However, no economic miracle would have been possible without the deeply-rooted traditions, historical experiences, or technical and organizational skills of the Japanese people.
From an economic point of view, Japan is no longer considered a non-Western nation. Technologically advanced far beyond the confines of Asian capabilities and potential, she is invariably grouped with Western, rather than Asian, nations. Despite her industrially advanced status, she is decidedly more traditional and Asian in the nonmaterial aspects of life, such as thought, behavior, and values, all of which profoundly influence her economic and industrial activities at home and abroad.
Mitsui: Three Centuries of Japanese Business is an impressive study of how the House of Mitsui began and developed into a huge economic empire. More than any other corporate entity, Mitsui symbolizes continuity and change and represents the economic growth and development of Japan during the past three hundred years. Furthermore, it is the prototype of the powerful combines, or zaibatsu, which emerged in the late nineteenth century and served as instruments of national policy in the building of a modern industrial Japan. As such they were the handmaidens in the government's program of modernization and industrialization along the lines of Western capitalism.
The founder of the House of Mitsui showed rare foresight in voluntarily abandoning the family's samurai status to become a merchant, or chonin. Starting out as a small brewery for making sak and soy, then expanding into a modest draper's shop and money exchange, Mitsui eventually became a huge conglomerate encompassing practically every type of business and industrial enterprise: banking, insurance, shipping, foreign trade, retail merchandising, construction, engineering, mining, brewing, textiles, chemicals, paper, glass, electronics, optics, and real estate.
In addition to its various enterprises, Mitsui became the fiscal agent in Osaka of the Tokugawa government near the end of the seventeenth century, continuing in this capacity for more than a century and a half. But toward the end of the feudal regime, it found itself in serious difficulties brought on by mismanagement. To rectify the situation, it recruited Minomura Rizaemon, a manager of uncommon ability, who not only injected new vigor into its operations but turned them around, and laid solid foundations for a great economic empire. Through an efficient information network, Minomura learned of the sharply declining fortunes of the bakufu, well before the crucial battle of Toba-Fushimi in 1868. Whereupon he began cultivating intimate relations with the future leaders of the anti-bakufu forces, notably Ito, Inoue, and Yamagata of Choshu. After the Meiji Restoration, Mitsui severed its relations with the Tokugawa forces and helped to raise war funds needed by the Meiji government to put down the resistance of the die-hard bakufu supporters.
Following the demise of the feudal regime in 1868, the House of Mitsui provided valuable expertise and resources toward the building of the new Japan. It responded to the urgent call of the Meiji government and furnished desperately needed funds for its operations. As the government's fiscal agent, it received deposits, disbursed funds, handled trade, and even issued its own paper currency, since its credit was better than the government's. It was no accident, therefore, that Mitsui was regarded as the de facto Ministry of Finance of the Meiji government until the establishment of the Bank of Japan in 1882. By helping to put the nation's finances on a sound basis, Mitsui not only won recognition, but actually worked itself into the financial structure of the government. The intimate relationship which was assiduously developed between Mitsui and the government provided a model for other enterprises. .
Mitsui's success was based not only on its policy of recruiting talent, which included the adoption of promising young men into the family, but also on its ability to obtain valuable advance intelligence regarding the government's moves, as well as to maintain close ties with the government. Among the innovations which have been attributed to Mitsui are sales on a strictly cash basis, emphasis on small profit per unit and large sales volume, which still is characteristic of Japanese business operations, a unique concept of the trading company, and the founding of the first Japanese chamber of commerce.
Mitsui's various roles in war and peace are well-known to historians of Japanese business. It has participated in the development of Manchuria, Korea, and China and in the expansion of Japan's trade and influence, both economic and political, in various parts of the world. Its far-flung activities have enabled it to gather all kinds of valuable information, not only for its own business operations, but also for the government in its formulation of policies and conduct of diplomacy.
In the phenomenal economic recovery following the war, Mitsui worked closely with other combines to ameliorate the harsh, if not vindictive, occupation policy which could have resulted in the complete dissolution of the zaibatsu. Thus, representatives of the zaibatsu effectively functioned as a moderating influence to restrain overzealous occupation officials from totally dismantling Japan's economic structure. These same representatives convinced John Foster Dulles, the personal envoy of the president, that a generous peace treaty would insure Japan's role as a reliable ally of the United States in the Far East. It was no surprise, therefore, that Dulles met with the Japanese representatives as well as the Supreme Commander for the Allied Powers, General Douglas MacArthur, in the Mitsui Building in downtown Tokyo, the citadel of zaibatsu prestige and power.
In explaining the postwar resurgence of Japan as a first-rate economic power, the author reveals the close collaboration between the government and the big-business establishment. He also shows how decisions were reached and policies formulated in informal social gatherings of small, intimate cliques at teahouses as well as in the executive suites of big business and high government officials. A detailed account of the Miike coal miners' strike provides insight into the modus operandi of big business in dealing with labor troubles. The author also follows closely the events which generated the strong anti-Kishi sentiments in the nation, resulting in the cancellation of President Eisenhower's projected visit in 1960.
This outstanding work on the history of the House of Mitsui is valuable reading for those interested in the development of Japanese business as well as the postwar rise of Japan as the world's third industrial power of the twentieth century.
Professor Emeritus of Political Science
When I was a little boy, I was bundled off to Sunday school regularly, clutching a small pink envelope containing a few nickels and dimes. Since there was a candy store lurking between home and the Presbyterian church of my parents' choice, the envelope did not always arrive unopened. But since the contribution was intended for the succor of pitiable Japanese heathens, conscience overcame craving as often as not, and I assume that some of the money was eventually used for this purpose by "our man in Tokyo," the Reverend August Reischauer.
After that initial exposure, my attitude toward Japan passed through the stages of indifference, disapproval, hatred, and again to pity and indifference until, in 1959—several decades and two wars later—I landed in Japan as a tourist. Observing the feverish reconstruction of the cities and the signs of economic expansion on all sides, I found myself intellectually and emotionally unprepared to assess the results of my boyhood's small investment. What was one to think of all this vigorous, determined activity, in which great masses of people seemed to act as one? Pity would have been impertinent, indifference inconceivable, and hatred absurd. Only astonishment and wonder would do. I realized for the first time that a unique kind of ferment beyond my comprehension was in progress, and that I had better set about repairing my ignorance.
The least answerable of my questions related to the nature of the forces at work and the means by which they were being directed. What kind of a show was this, and who was running it? At the time, a great confrontation between the right and the left in Japan was shaping up, and it was easy to become confused by political superficialities. But it was soon apparent to me that the propulsion came from an essentially united people, and that despite talk of social upheaval, guidance of the nation remained firmly in the hands of a small elite called zaikai in Japan and "big business" elsewhere. As a step toward understanding the processes involved, I began to study and write about the economy, finance, and industry for publications in Japan and abroad.
In the late 1960s Mitsui Bussan Kaisha invited me to write a history of the venerable Mitsui concern. Rashly, I accepted because I thought it would be a good chance to learn something about Japanese economic history. The result, born from sore travail, was a series of fifteen articles called "The Mitsui Story" that appeared in Mitsui Trade News between 1969 and 1972. On the basis of research conducted for that project (in which Mitsui Bussan cooperated fully) I began an independent work, the outcome of which is Mitsui. .
I should like to emphasize that this is not an "authorized history." Although officials of several Mitsui companies have been most helpful in providing information and references, the selection of material and the opinions presented here are my own. No member of any Mitsui company has seen any part of the manuscript, and therefore no one but myself can be held responsible for any errors, omissions, or other faults that may be found in these pages. And although Mitsui Bussan has kindly permitted its familiar emblem to be used as a decoration in the book, it must not be construed as being an endorsement of this history or of anything in it.
In Japan, the family name precedes the given name, and that custom has been observed in this book. The spelling of names is always a problem because they must be transliterated from ideographs that may have many readings. Furthermore, Japanese are accustomed to changing their names for various reasons. In rendering names I have tried to use the reading and spelling preferred by the person concerned and have also used the name under which that person is or was best known. Honorifics, used invariably in Japan, have been omitted here.
In assembling and evaluating historical material, I had to cope as best I could with an overabundance of opinions and a dearth of hard facts. Even in ascertaining the number of deaths resulting from the Great Kanto Earthquake of 1923, one finds several "authoritative" figures, all different. Until 1945 Japan was a closed society, in which freedom of inquiry and expression were severely limited, and credence was based upon authority rather than veracity. Yet to hedge each fact with disclaimers would be unduly cumbersome in a book of this kind, so in most cases I have given the data or versions of events that I considered to be the most valid, without qualification. I entreat the reader to view cautiously the portions dealing with prewar history. Some small parts of the book have appeared, in different forms, in the Far Eastern Economic Review, Burroughs Clearing House, Corporate Financing, and the Meanjin Quarterly.
In preparing to write this book I have talked with scores of persons connected in some way with the eleven Mitsui families or with the Mitsui group of enterprises bearing their name. I shall cite only a few individuals who are representative of their particular organizations, while extending heartfelt thanks to others who have been no less helpful.
Particular thanks are due to Mitsui Hachiroemon Takakimi, present head of the main family; Mitsui Takasumi, chairman of the Mitsui Foundation, and Mrs. Mitsui; Mitsui Reiko, who is compiling a history of the House; Mitsui Takamitsu, heir of Hachiroemon; Mitsui Takanaru, head of a branch family, and Mrs. Mitsui.
Of those connected with the Mitsui families, I wish to thank Shirane Matsusuke, a former vice-minister handling the Imperial Household's finances; Minomura Seiichiro, a descendant of a famous manager of the Mitsui concern; and Minomura Tomoyuki, also a descendant. Of special help has been the historian Yamaguchi Eizo, custodian of the Mitsui family archives. For general information about Japan and its history I am beholden to Nishi Haruhiko, former Vice-minister of Foreign Affairs; his son Teruhiko, Honorary Consul of Ireland in Japan; Shirai Kuni, proprietor of the Yamaguchi teahouse, at which the leaders of modern Japan have congregated since the Meiji era; and Sakamoto Moriaki, an expert on the history of the Satsuma clan.
Former high officials (now elder statesmen) of Mitsui enterprises whom I have interviewed with interest and benefit are Sato Kiichiro of Mitsui Bank; former finance minister Mukai Tadaharu; Tashiro Shigeki of Toray Industries; and Niizeki Yasutaro, Mizukami Tatsuzo, and Tanabe Shunsuke of Mitsui Bussan. At Mitsui Real Estate Development I learned much from president Edo Hideo; and at Mitsukoshi, from president Okada Shigeru. President Omoto Shimpei and chairman Kurata Okito, of Mitsui Mining and of Mitsui Mining & Smelting, respectively, were especially generous with their time. At Mitsui Bussan I had very enlightening conversations with president Wakasugi Sueyuki; Sakurauchi Takeshi, then adviser to the board; and Ogino Sachu, general manager of the finance department. In addition, I talked with numerous directors, managers, and superintendents of Mitsui Mining, Mining & Smelting, Aluminum, Petrochemical, Shipbuilding & Engineering, Bussan, Bank, and other companies of the group, whose courtesy and helpfulness are deeply appreciated.
Among those unconnected with Mitsui but deserving of special thanks are Takahata Seiichi, former chairman of the Nissho trading company, and Eleanor Hadley, a noted authority on Japanese oligopolies. For early guidance in the arcana of Japanese politics I wish to thank sociologist Shibata Tokue, Director of the General Planning and Coordination Bureau, Tokyo Metropolitan Government; theorist Ichiyo Muto; historian David Cond6; and editor Uyeno Kazuma. For patient assistance in research, I express my thanks to Kurotaki Mitsugu, Furuyama Eilli, and the library staffs of the Foreign Correspondents Club and International House of Japan. Constructive editorial help has been given by Martin Davidson and Rebecca Davis. And finally, I offer my deepest gratitude to Midori Yamakawa for her able and energetic research, translation, and general help, without which this book could never been completed.
Chapter 1—From Sword to Soroban
Mitsui is the world’s oldest large-scale business enterprise. The Mitsui family opened its first shop five years before the Pilgrims landed in New England, and established a bank—still operating in the same location—in 1683, a decade before the Bank of England was founded. Late in the 1860s, soon after the Civil War in the United States, the House of Mitsui gave indispensable help to the revolutionaries who toppled the ancient military regime in Japan and loosened the shackles of feudalism. From then on Mitsui was in the forefront of Japan's economic modernization, and by the early twentieth century it was a dominant political force in the fast-rising nation.
The power and reputation of the concern reached full maturity after the First World War, and in the nineteen twenties and thirties the name Mitsui inspired respect and awe, or hatred and fear, throughout the Japanese empire. The skies above Japan's cities darkened with the smoke from Mitsui's mills and factories. The rivers grew turbid with the outpourings from their mines, metal refineries, and pulp mills. The earth shook from the vibrations of their hydraulic presses, pile drivers, and blastings. Mighty ships glided down the ramps of Mitsui dockyards to join the fleet of Mitsui vessels plowing through remote seas, bringing raw materials for Mitsui industries, or carrying away the goods they produced in quantities that at first astonished and then appalled the world.
From the northern frontiers in Hokkaido to Kyushu in the south Japanese men, women, and children toiled in Mitsui's forests, fisheries, and plantations. They labored ceaselessly in the stifling labyrinths of Mitsui mines and in small workshops, wholesale houses, docks, warehouses, lumberyards, and quarries owned or controlled by Mitsui. University graduates competed fiercely for employment in the offices of Mitsui banks and insurance and commercial houses, the most puissant and prestigious in the nation.
Although the people may have been unaware of it, a large share of the necessities and luxuries they purchased were produced ordistributed by Mitsui, and perhaps one out of every ten Japanese was dependent upon a Mitsui a Mitsui enterprise or subsidiary for the wages with which to buy them. In Japan's colonies—Formosa, Korea, and South Sakhalin—as well as in Manchuria and parts of China proper Mitsui operated the most productive concessions, and imported their products to Japan or exported them to other countries. Mitsui was the main backer and beneficiary of the South Manchurian Railway; the largest single private enterprise in the Japanese empire, and sponsored armies of mercenaries for the penetration and pacification of China. Mitsui supplied arms and money first in 1912 for Sun Yat-sen's revolution to overthrow the Manchu dynasty and then in 1932 to restore the same dynasty in Manchuria—which Mitsui had once nearly succeeded in buying outright from corrupt Chinese politicians.
Mitsui Bussan Kaisha, known abroad as Mitsui and Company, spanned the globe with its trading and shipping network, through which it handled about forty percent of Japan's exports and imports. More extensive and better organized than the Japanese foreign office, it conducted diplomacy for the government and gathered not only commercial information but political and military intelligence that was often of decisive importance to the nation.
In 1905, during the Russo-Japanese War, managers of Bussan's branch office in Shanghai followed the movements of the czar's Baltic Fleet, flashed accurate information to the Japanese high command, and enabled the imperial navy to win one of the greatest sea battles of modern times. During the First World War Mitsui Bussan obtained advanced military aviation technology by purchasing a large American aircraft manufacturing plant and virtually monopolized sales of aircraft in Japan for a long time thereafter. Two decades later coded messages planted in Bussan's trade reports from Honolulu helped Japanese intelligence to keep abreast of the disposition and movements of the United States Navy's warships at Pearl Harbor up to the morning of December 7, 1941. Throughout the Second World War Mitsui men, secretly commissioned as intelligence officers (and other officers disguised as Mitsui employees), worked for the fatherland wherever the company was permitted to operate. Bussan's branches served as virtual appendages of the military government in the vast but short-lived "Greater East Asia Co-Prosperity Sphere."
Mitsui was Japan's largest private contributor to charitable institutions, hospitals, schools, and patriotic organizations. Its paternalistic manufacturing and mining enterprises adopted some of the most advanced labor practices of the West, and their employees enjoyed the best wages and working conditions in the country. Yet the Mitsuis were hated as exploiters and profiteers. In the 1930s their highest executives were advised to wear bulletproof vests, and two who ignored this counsel were assassinated— members of secret societies that were subsidized by other Mitsui executives. It was Mitsui that provided both precious radium for cancer research in Japan and opium for the pacification of occupied regions in Asia. Mitsui factories made the dyestuffs for the colorful Japanese fabrics that gained worldwide favor; but, when national policy dictated, the same plants were converted to the production of military explosives and chemical weapons for wars of aggression. Mitsui's leaders were the most effective opponents of communism in Japan, and a Mitsui subsidiary supplied a major share of the weapons used by the czarist regime in its futile effort to crush the Russian revolution. The same weapons, ironically, were instrumental in assuring the victory of Lenin's Bolsheviks and establishing the Soviet Union.
Controlling as it did one of the major prewar political parties in Japan, Mitsui could influence legislation, arrange the appointment of friendly cabinets, and make its imprint upon foreign policy. Independently or in collaboration with other zaibatsu, or family-controlled financial cliques, it could often thwart power-hungry bureaucrats and militarists, promote necessary administrative reforms, and oust incompetent governments. Its officials, using economic leverage, also had the power to suppress reform movements, smash unions, imprison or liquidate agitators, and secure immunity for miscreants within their own ranks. Their hatchet men included cabinet ministers, military officers, police chiefs, newspaper editors, and bosses of terrorist societies, who would stop at nothing in supporting the interests of their protectors.
Mitsui's trade and overseas investment programs boosted the nation's power and prestige, smoothing the way for its expansion in foreign markets and giving it access to vitally needed raw materials. Among the zaibatsu Mitsui stood out as an advocate of peaceful trade and international good will, yet its decisions sometimes fueled the flames of war and determined the rise or fall of foreign governments.
The four largest zaibatsu owned about twenty-five percent of Japan's corporate assets, and just two of them were responsible for three-fourths of Japan's overseas investments during the height of Japanese imperialism. Standing head and shoulders above the others was Mitsui, whose sprawling empire embraced every significant sector of industry, finance, and commerce, and employed as many as three million people domestically and overseas.
At the head of this empire was the Mitsui holding company, which under a succession of names ruled its vassal businesses in much the same way as the Tokugawa shoguns had exacted obedience from the feudal lords of Japan. And, like those shoguns, who governed in the name of the imperial court, the main company was subject to a higher authority. In this case the "emperor" heading the main family was Baron Mitsui Hachiroemon, a direct descendant of the Mitsui who had founded the House three hundred years before. The princes in this sovereign House were the heads of the ten branch families, who were bound together by a formal constitution dating from the establishment's second generation. This unusual document prescribed explicit responsibilities, duties, policies, and behavior expected of each individual, as well as the unalterable hierarchy of the families, their shares in the proceeds of the business, and the nature of official and personal relationships to be maintained among them.
The perpetuation of a family's fortune and position by a written code is not unusual in the world, or even in Japan. What distinguished the House of Mitsui from other wealthy and influential families was its rapid development into a national institution and its tenure of quasiofficial status through the tumultuous events of modern history until its enforced collapse in 1945. In this respect there is a strong similarity between Mitsui and the European houses of Rothschild and Krupp, whose activities also were closely bound up with the fortunes of empire. But the Mitsui influence emerged much earlier, and seems to have been more pervasive than was that of any European or American financial house. Without the support of Mitsui the momentous Meiji revolution of 1868 could scarcely have succeeded, and in the subsequent decades of the nation's metamorphosis Mitsui was the foundation upon which the modern Japanese economy was built. The role that individual Mitsuis played in those developments is uncertain, but their participation was considered to be so essential that collectively they became virtual hostages of the state.
The parallel between the House of Mitsui and the imperial family of Japan is striking. Its origins were shrouded in the same kind of official mythology, and its structure and regulations were elaborated by the same legal authorities who rationalized the juridical basis of imperial rule. In times of peril its continuation was assured by government intervention; its matrimonial alliances (eventually with some of the emperor's relatives) were arranged with equally fine discrimination; and the personal activities of its members usually were immune from scrutiny and criticism. At the height of its power its leaders—whose positions were hereditary—were supervised by the same elder statesmen who surrounded the emperor, and the decisions of its administrators were subject to their veto. Like personages of the imperial house, the Mitsuis' chiefs were seldom seen by anyone except peers of the realm, high executives, or members of their households. Their faces were known to the public only through official portraits, and their activities only from carefully censored news reports. But the features of two Mitsuis, like those of Emperor Meiji, were known to every literate Japanese and revered by many: the founder of the House as a major enterprise, Mitsui Hachirobei Takatoshi, was portrayed in the primary-school readers issued to every boy in the country; and the likeness of his remarkable mother, Shuho, appeared in similar books for girls. Accompanying the pictures were homilies extolling the thrift, enterprise, diligence, and foresight of those worthies, presented as examples to be followed by every upright youth.
The first Mitsui shop was established not by Hachirobei but by his father, Sokubei Takatoshi, whose claim to fame lay in his foresight and courage in renouncing his rank as a samurai, or warrior-aristocrat, to become a lowly tradesman. Sokubei's forebears had been provincial lords of minor importance but of substantial estate. It is difficult to trace their pedigree for more than a few centuries, because class-conscious Japanese have always tended to cherish flattering legends about their origins. The Mitsuis are no exception: in prewar days, when history was their handmaiden, their obliging genealogists tried seriously to trace the clan's ancestry back to the Fujiwaras, who, like the emperors, were legendary descendants of Amaterasu Omikami, the Sun Goddess.
According to one legend, a member of the Fujiwara family who was named Umanosuke Nobunari left Kyoto about A.D. 1100 (during the period of the first crusades in Europe) to take up his abode in nearby Omi Province. The new settler, while looking over his property, extending along the shore of Lake Biwa, discovered that it had three wells. In one of them he found a treasure in gold coins. To commemorate this good fortune he changed his name to Mitsui, which means "three wells."
The Mitsuis' history, as distinguished from their mythology, seems to begin late in the Muromachi period, at about the time when, on the other side of the world, Christopher Columbus was asking the rulers of Portugal and Spain to finance his visionary projects. At that time the Mitsuis were retainers, with samurai rank, of the Rokkaku branch of the Sasaki clan in Omi province. Those Sasakis, famous as warriors, belonged to the Omi Genji, descendants of Minamoto Yoritomo (1148-99). That military genius, having defeated the dominant Taira clan with the help of Sasaki's samurai, had been appointed by the emperor in 1192 as the first seii-tai-shogun, or "barbarian-quelling generalissimo," and had introduced the bakufu, the system of government by shoguns, which thereafter would control Japan. Three hundred years later the Sasakis were still firmly ensconced in their Omi stronghold.
Amid the anarchy that prevailed during most years from 1300 to 1600, every samurai home had to be an armed camp, and the family unit took on tactical as well as social importance. Kannonji castle, fortress of the Sasaki lords, was besieged repeatedly, and neighbors less stoutly defended were in constant jeopardy. The Mitsuis, small in stature and delicate in build, owed their survival to the power of the Sasaki daimyo, whom they apparently served as administrators rather than fighters. Even so, the Mitsuis must have been of rather high rank, for late in the fifteenth century they were able to marry one of their daughters to Takahisa, a younger son of Lord Sasaki.
Because of the need for continuity and solidarity in the family, it had become customary for a father to bequeath his entire estate to his oldest or most capable son, or, if he lacked a natural heir, to adopt as a son the husband of one of his daughters. Such an adopted heir, or yoshi, was Sasaki Takahisa, who became head and protector of the Mitsui house.
Takahisa built a castle at Namazue, east of Lake Biwa, where the Mitsuis lived as a petty daimyo clan under the aegis of the Sasaki warlords. Little is known of Takahisa's descendants during their occupancy of Namazue castle, but as samurai they must have followed the code of knighthood known today as bushido. This inflexible and ungentle brand of chivalry, introduced by Takahisa's ancestors, the Minamoto shoguns, emphasized courage in battle and loyalty to one's liege lord even at the sacrifice of one's fortune and family, with death by seppuku, or ritual disembowelment, as the compulsory alternative to dishonor. The true warrior had to show indifference in the face of danger, hardship, love, and death. Unlike European knights, a samurai was forbidden to display sentiment, and in his austerity he was contemptuous of material gain. His rewards for enduring a spartan and dangerous life were the prestige of being near the top level in a rigidly stratified society, and the privilege of wearing two swords, the temper of which he was free to test upon the unresisting flesh of peasants, craftsmen, merchants, or outcasts whenever he saw fit.
Provincial life in those dark ages was neither comfortable nor secure, for one never knew when a band of samurai, bellowing defiance, with swords flashing and torches alight, might swagger into a village or manor, to leave it a blazing shambles. For those thick-skinned gentry bloodshed was the badge of manliness, and individual mayhem or indiscriminate massacre the very meat and marrow of life.
The most bloodthirsty warlord of the sixteenth century was Oda Nobunaga, a minor daimyo who nursed the high ambition of bringing all of Japan under his sway. In his rampage through central Japan he trampled over anyone or anything that lay in his path. To curb the influence of the Buddhist warrior-priests, who then held great secular power, he set thousands of temples ablaze and slaughtered every one of their defenders.
Among those who impeded Nobunaga's advance through Omi on his march toward Kyoto were the Sasakis and their vassals, whose martial skills, valor, and fortified castles availed them nothing against the savagery of the invaders. During Nobunaga's onslaught sixteen castles, including those of the Sasakis and the Mitsuis, were razed or captured. The few survivors of the Sasaki clan were subjugated, and thereafter the Rokkaku House of Sasaki vanished from the annals of Japan's history.
The Mitsuis, meanwhile, were demonstrating the prudence for which later they were to become renowned. The head of the House, Takayasu, Lord of Echigo, sensing the approaching danger, told his servants to pack whatever valuables were portable, and fled with them, his family, and a few retainers. With phenomenal luck (another characteristic of the Mitsuis), they made their way across central Honshu to Ise Bay, and at length found refuge near the peaceful town of Matsusaka, where as an unemployed samurai Takayasu had plenty of time to think upon this lesson in the disadvantages of bushido.
Within a decade after the defeat of the Sasakis in 1568 Oda Nobunaga had subdued most of Japan, and after his death the task of unification was pursued successively by his ablest generals, Toyotomi Hideyoshi and Tokugawa Ieyasu. But rivalry between Hideyoshi's followers and Ieyasu once again divided the country into two warring camps. The showdown came in 1600, when two mighty armies-about 160,000 men in all-joined in battle at Sekigahara, near Nagoya. Ieyasu won the day, took forty thousand heads as trophies, and emerged as undisputed ruler of Japan. By redistributing the fiefs in such a way that his most loyal vassals could keep watch over those whose reliability was questionable, he prevented any effective challenge to his rule. In consultation with Japan's wisest scholars he established the Tokugawa shogunate, the government that endured from 1603 until 1868.
A detached but interested observer of Ieyasu's victories and reforms was Mitsui Sokubei Takatoshi, eldest son of the Takayasu who had been Lord of Echigo. Apparently a gentleman of leisure if not of affluence, Sokubei had taken root in Matsusaka, a market center for the fertile and relatively prosperous Ise Province, now a part of Mie Prefecture. But he had not become a rustic, for Matsusaka was near a busy port for coastal trade and was also a stopping point for pilgrims journeying to the Grand Shrines of Ise, then as now the most sacred place of worship for believers in Shinto. Sailors, pilgrims, and traveling merchants brought news quickly to Matsusaka, and from them Sokubei was able to judge the trend of the times. He also took occasional trips to Edo (now called Tokyo), where Ieyasu had built an enormous castle as headquarters for his tightly organized bakufu government. What astonished Sokubei most was the rapid growth of the town lying outside the walls of Ieyasu's fortress, which was some two miles in diameter, and the ever more important role that trade was playing in the life of the bakufu's populous capital.
Officially, commerce was considered a parasitic occupation, and the chonin, the merchants or townsmen, occupied a social rank just one step above the eta, the outcasts, who were not classified as human beings. Sumptuary laws prohibited the chonin from wearing fine clothing, using certain forms of speech, or living in districts of the city that were inhabited by samurai.
But during the sixteenth century, despite almost constant warfare and political chaos nationally, workers in agriculture, industry, and trade had shown considerable improvement in the amounts and quality of their goods. As local warlords brought weaker neighbors under their sway, feudal unity was strengthened and internal commerce was fostered. Concurrently, the traditional system of bartering rice for handicrafts and other commodities was being gradually supplanted by the use of money. Burdened by the costs of warfare, daimyo borrowed to meet expenses, and prosperous commoners, not only merchants but landholders and priests as well, became moneylenders.
As the money economy developed, the merchant class grew in numbers and, despite formal kinds of discrimination, was tolerated and even on occasion given official status. The best appointments fell to those who had helped Tokugawa Ieyasu before the Battle of Sekigahara by providing his troops with supplies on credit. In Edo as well as in Osaka—the commercial center of western Japan—they even took part in city administration. Those long-sleeved quartermasters to the bakufu enjoyed a status far above other members of their class, and their positions had the advantage of being hereditary.
From such observations, and the unfortunate experiences of his own family, Sokubei formulated an original vision of Japan's future and the Mitsuis' place in it. He could see that, in a country thoroughly pacified by a central government, the role of the warrior class inevitably would wane. The likelihood of wars with other countries was remote, since Ieyasu, alarmed both by the susceptibility of his countrymen to the Christian religion and by the power of European ships, had begun tightening the exclusion laws directed against foreign traders and missionaries. Sokubei could also see that under the orderly rule of the bakufu agriculture, industry, and domestic trade would thrive and that despite any rules to the contrary those people who were qualified to engage in business would rise in power and affluence. Reputed to be the shrewdest and most ubiquitous merchants in Japan were the men of Omi, his ancestral home, and of Ise, his adopted one. It was not unreasonable to believe that, in such a setting and with a modest amount of capital, a Mitsui could also succeed in business. At some point in his cogitations upon these matters he made the secret resolution, breathtaking but perfectly logical, to exchange his samurai's swords for the soroban—the abacus of a Japanese tradesmen.
His choice of a time for reaching that decision was most appropriate, if not prophetic. In 1616, the final year of his life, Tokugawa Ieyasu eliminated the last contender for supremacy and left his worthy son Hidetada, who had succeeded him as nominal shogun eleven years earlier, securely in command of the unified empire. In the same year all ports except Nagasaki and Hirado were closed to European ships, as a measure for regulating foreign trade and preventing the conquest of Japan by those aggressive Europeans. At this significant time in history Sokubei made a trip to Edo. Upon his return, perhaps with his imagination inflamed by the prosperity he had seen there, he assembled his household—his wife Shuho, several children, retainers, and servants—to inform them of their impending descent to plebeian status. His task was not made easier by the mutely accusing presence of an exceptionally large suit of armor, once worn by his more courageous ancestors and brought from Omi during Nobunaga's onslaught. But now there was no daimyo to whom the Mitsuis owed fealty, and as head of the House, Sokubei's first duty to his ancestors was to repair its fortunes. Bowing to the family shrine and clapping his hands smartly, he explained his intention to sacrifice the Mitsuis' hallowed but empty privileges for the sake of their material welfare: "A great peace is at hand," he declared solemnly. "The shogun rules firmly and with justice at Edo. No more shall we have to live by the sword. I have seen that great profit can be made honorably. I shall brew sak and soy sauce, and we shall prosper."(1)
This simple speech, made in 1616, and recorded in the family chronicles more than three hundred years ago, marked the beginning of the Mitsuis' financial empire.
Chapter 2—Echigoyo the Shunned
In feudal Japan political and military activity centered upon the strongholds of the shogun and his vassals, who lived as sumptuously as the rice yields of their fiefs permitted. At their castle-courts, surrounded by mazes of walls and moats, they assembled retainers, soldiers, craftsmen, concubines, and servants, whose needs and fancies engendered trade. Markets grew up outside the castle walls and developed into populous settlements. In just that way the ancient Chinese ideograph for "market" had come to represent "town" or "city," as well. The castle town of Matsusaka was fortunate in being under the protection of a daimyo who headed the Kii branch of the Tokugawa family and enjoyed the bakufu's favor. Lord Kii's courtiers and retainers received ample stipends, and local business was further enhanced by the steady stream of pilgrims traveling to and from Ise's shrines. Mitsui Sokubei could not have chosen a better starting point for his career as a chonin.
The brewing of sak and of soy sauce are relatively simple processes, requiring only a small amount of capital and a few workers who know the traditional skills. Sokubei's brewery was different from others only in being run by a former samurai. People began calling it Echigo-dono-no-sakaya, Lord Echigo's sake shop, because his father had borne that title. The appellation suggests that Sokubei was respected, but that commoners were somewhat in awe of this aristocratic brewer. At any rate they were slow to patronize his shop, and business was poor at first. What little of it there was Echigo-dono managed badly. Although he was adept at light verse and calligraphy, he was clumsy with figures and even worse at drumming up trade.
It was his wife Shuho, the daughter of a successful merchant, who stood between Sokubei and failure. Although she had married him when she was only thirteen years old, and began to bear children soon afterward, she found time to participate in business affairs and showed remarkable aptitude as she matured. Unencumbered with social pretensions, she could talk to customers in their own dialect and gained favor with their servants by offering them tea or tobacco when they came on errands. On market days farmers from the countryside were in a festive mood, and pilgrims and other wayfarers were always thirsty when they arrived in Matsusaka. Under Shuho's cajoling, customers at the shop often spent more than they should have and had to borrow money for the journey home, leaving their valuables as security. From this practice it was only a short step to pawnbroking, a business she established as a sideline. Interest on loans and income from selling unredeemed pledges turned out to be more profitable than brewing, and Echigo-dono's shop began to prosper.
Taking warning from the prodigality of others, Shuho cultivated the trait for which she is best remembered—thrift. As a young mother with four sons and four daughters to provide for, she served very frugal meals, and no one was allowed to leave until his rice bowl was empty. Even when she could afford silk she and her children wore cotton, which was grown, spun, and woven in the Ise region. Every youngster was required to contribute to the welfare of all by doing useful tasks, which formed the most important part of his meager education.
When Sokubei died prematurely in 1633 his widow found consolation in religion and work. Rising at daybreak, she would bathe in cold water and pray to the Buddha and to Shinto deities before starting her day's labors, which extended well into the night. Despite her professional conviviality in the shop she led an increasingly austere life privately, and her frugality earned her a reputation for miserliness.
Shuho worshiped frequently at the temples, but to avoid wasting time she and her maids would do a bit of scavenging on the way home. They would collect discarded sandals and horseshoes, which were woven from straw, to be used as fuel or compost. Paper strings, with which men and women tied their hair, were picked up, spliced, and wound into big balls for use in the shop.
In Shuho's household nothing was wasted. The lees from the sak and soy vats were converted into edible byproducts, ordure was saved for fertilizer, clothing was handed down until it was threadbare, and even broken utensils were put to some unexpected use. Thus a bottomless vat was converted into a cistern, and a leaky wooden dipper became a flowerpot stand. In such an eccentric matriarchy, Sokubei's children, the first generation of Mitsui commoners, acquired the values that were to bring fortune to his descendants.
The most flourishing market in Japan was Edo, whose inhabitants—called Edokko—were renowned as spendthrifts. Many merchants of Omi and Ise joined the rush to the shogun's capital on the sound theory that a fool and his money are soon parted. When Shuho's eldest son, Saburozaemon Toshitsugu, was thoroughly trained at Matsusaka she sent him to Edo with capital to open a draper's shop called Echigoya. Assisted by the third son, Saburobei Shigetoshi, he was not long in establishing his own business house, which in time was known as the "nail-puller," or kuginuki, Mitsui from the shape of his emblem. The second son, Seibei Hiroshige, was adopted into another family, leaving the youngest, Hachirobei Takatoshi, at home to assist Shuho.
Hachirobei, born in 1622, showed conspicuous talent from childhood, and it would have been natural for him eventually to inherit the business of Echigo-dono in Matsusaka. But Shuho, sensing that he could become a great merchant, sent him to Saburozaemon in Edo as an apprentice when he was only fourteen years old. Hachirobei proved to be so able that the brothers soon opened a second shop, also called Echigoya. The less talented Shigetoshi returned to Matsusaka to help Shuho, and Saburozaemon went to Kyoto to organize a cloth-purchasing system. This left young Hachirobei in charge of the Edo shops, which he managed with gratifying success.
On the national scene the new bakufu regime was effecting dramatic changes, many of them unintentionally favorable to the merchant class. The third Tokugawa shogun, Iemitsu (who ruled from 1623 to 1651), took extreme measures to curtail all foreign influences. Having closed the country to foreign trade, he forbade Japanese to leave the country, upon pain of death. To ensure isolation he made it a crime to build ships large enough for overseas voyages, and he established monopolies to handle the tightly controlled foreign commerce conducted through the last open port, Nagasaki. Foreign missionaries landing in Japan were put to the sword, and at least twenty thousand Japanese Christians who staged a revolt in Kyushu were massacred. When an embassy of Portuguese came to ask for a restoration of trade privileges their ship was burned and fifty-seven of the intruders were decapitated. Such fanatical isolationism, although costly to the economy, protected domestic producers and traders against competition from foreigners and the nation from conquest.
Iemitsu was suspicious even of his own vassals and, beginning in 1634, enforced the system of sankin kotai, under which they were required to spend several months of each year in Edo. When a daimyo returned to his own domain he had to leave his wife and children behind as hostages. This system made it necessary for each daimyo to build a residence in Edo and maintain a full-time staff there as well as on his fief. On his travels to and from the shogun's court he had to be accompanied by a retinue of a size and degree of elegance befitting his rank. All this was ruinously expensive, as Iemitsu intended it to be, and the daimyo had no recourse but to borrow money from the merchants. Such business usually was profitable, but risky, because a chonin had no legal way to compel a daimyo to pay his debts.
As the years passed, Hachirobei observed the business world cannily and developed his own ideas. He saw, for example, that the people who flocked in from all over Japan to become townsmen were coalescing into a new and prosperous class. Yet tradition-minded merchants like Saburozaemon concentrated their sales efforts upon the aristocrats, to whom they were forced to extend liberal credit. Hachirobei longed to be independent and to try new ideas, but enryo—restraint or reserve—kept him from competing with his elder brother. Then, when he was twenty-eight, his hopes were dashed by the death of Shigetoshi, which obliged him to return to Matsusaka and help the aging Shuho run the family business.
Echigo-dono's brewery and pawnshop were too humdrum to hold the interest of an Edo chonin, so Hachirobei set up a side business as a moneylender. This he was well able to do, for during his fourteen years in Edo he had saved about fifteen hundred ryo, equivalent to nearly seven hundred and fifty pounds sterling in silver. (At certain times during the Tokugawa period a ryo was equivalent to about one pound sterling, but the discrepancy must be noted because, by international standards, silver was grossly overvalued in Japan.) For the modest sum of sixty ryo he bought the estate of another merchant. Then he took a wife, Jusan, who had been picked for him by Shuho. His fifteen-year-old bride, a merchant's daughter like her mother-in-law, was energetic and levelheaded. Having established his own house, into which sons and daughters were born in quick succession, Hachirobei was well launched as a provincial banker with a reasonably promising, if not exciting, future.
Shrewd operators such as Hachirobei learned to spread their risks in various ways, forming syndicates with their relatives and fellow merchants, or borrowing short-term capital from temples and shrines and relending it to daimyo. Hachirobei also learned the tricks of rice trading. The daimyo usually repaid their loans in rice, but later would find it necessary to borrow rice with which to pay the stipends of their samurai. By various manipulations familiar to experienced commodities speculators, the merchants caused the market to fluctuate widely and, with foreknowledge of price changes, managed to turn neat profits both ways, in addition to the high rates of interest they charged. Another phase of Hachirobei's business was lending money to farming villages, with mortgages as collateral, for developing virgin land, handicraft workshops, or new agricultural products. In this sense he was a pioneer industrial capitalist.
As the "great peace" foreseen by Sokubei settled over the land in the mid-seventeenth century, the Matsusaka Mitsuis' fortune grew substantially. Jusan raised six sons, all of whom listened dutifully to Hachirobei's lecturing and heeded his counsel. One of them wrote in later years: "Soju [Hachirobei's posthumous name] said that if one loaned ten [units] of silver at 1.2 percent a month, it would be doubled in five years, and in fifty years would become ten thousand [units]. Therefore, one should make the most of even small amounts, for even a petty clerk could become a millionaire in time."(1)
Hachirobei did not always follow his own advice, however. He had often warned his elder brother Saburozaemon against lending to daimyo, and the latter had come to the brink of bankruptcy by ignoring the admonition. Yet Hachirobei continued to lend money to the lord Kii—perhaps because a refusal would have been more hazardous than the loan itself. That preeminent daimyo, as head of one of the three Tokugawa families from which a shogun could be selected, was a relatively good risk, of course, but Hachirobei was still worried. Although the Tokugawa domains produced almost one-third of the nation's rice, the extravagance of the shogun's court and the folly or knavery of his ministers were leading the nation to ruin. Merchants knew that some officials were embezzling vast sums; in fact, one of them, after a life of flagrant profligacy, had provided himself with a coffin of solid gold. Iemitsu set down severe regulations to curb the extravagances of others, but when he died his own lavish way of life was revealed. At Edo Castle there were so many retainers that Iemitsu's successor found it necessary to dismiss three thousand of them—mostly females.
In 1673, when Hachirobei was fifty-one years of age, he reached a decision no less bold and prophetic than that of his father: from now on he would not risk his modest fortune upon the whim of any daimyo. Like Sokubei, he would dare to follow the trend of the times and devote himself to business with commoners. Having his mother's blessing, he moved to Kyoto with his family and opened a business devoted initially to the procurement of fabrics. Leaving his eldest son, Takahira, in charge, he took his second son to Edo in the same year and opened a small shop in a good location adjacent to the mismanaged "nailpuller" establishment of his late brother. Here he began to sell the fashionable Nishijin brocades and other silks purchased in Kyoto or elsewhere. When the shops were running smoothly, he left the everyday management to his six sons and spent most of his time traveling and studying business conditions in general. (Today we would call that market research.)
His Edo shop, called Echigoya after its defunct precursors, fronted on Honcho-dori, where the most stylish drapers' shops were clustered. Those merchants sold goods mainly to daimyo or upper-class samurai families by showing samples or actual bolts of cloth at the customers' mansions. However, Hachirobei had neither the opportunity nor the incentive to cater to such aristocrats, who settled their accounts only twice a year at best. To compensate for this deficiency, Hachirobei laid in large stocks at Kyoto and sold them at wholesale prices to smaller merchants in the provinces. The profit margin was small, but rapid turnover and prompt payment made such a system worthwhile.
The costly fabrics handled by the merchants of Honcho-dori were sold only by the whole piece, sufficient to make a kimono, and this practice limited their sales. Hachirobei, aware that there was quite a lot of cash jingling in the coin pouches of the common people, was seeking new ways to expand the market. A precious clue came from one of his clerks, who patronized the public baths and enjoyed listening to the chatter of the female bathers. A favorite topic of conversation, he told Hachirobei, was cloth: women were especially eager to find small pieces that could be used for making pouches, personal ornaments, or covers for treasured objects. Since no merchant was foolish enough to cut into a bolt for such a trifling sale, women had to be satisfied with exchanging remnants left over from kimono-making.
When Hachirobei had mulled over this bit of information, he conceived a daring experiment: he would sell cloth in any length desired. For this privilege, he soon discovered, customers were willing to pay a much higher unit price. And since his wholesale business enabled him to maintain an exceptionally attractive variety of stock, customers flocked to his establishment. Encouraged by their enthusiastic response, he again flouted tradition by selling his materials—not only pieces but whole lengths as well—for spot cash only.
The latter innovation was resented by aristocrats, but it reduced his credit risks significantly, and had other advantages as well. By purchasing on credit and selling for cash, Hachirobei was able to employ his capital more briskly than his competitors. Since he knew where he stood at all times, he was able to calculate costs more precisely, reduce his markup, and sell at fixed prices. This eliminated haggling, a timehonored but time-wasting custom, and gave the purchaser assurance that he was not being cheated. The efficacy of Hachirobei's new methods was soon apparent. Within a year after his arrival in Edo he had prospered so immensely that he opened a new shop in the same street, having six times the frontage of the old one, and employed some fifteen clerks, five apprentices, and several servants at both stores.
Predictably, Echigoya's unorthodox methods first irritated and then infuriated competitors. Their rage reached the boiling point when Hachirobei snatched a big order for crepe from his rival, Matsuya. Having violated a gentlemen's agreement against underselling, the Mitsuis were ostracized by the merchants' guild and before long Echigoya was known as "the shunned." Some envious rivals tried to incite the clerks to revolt against Hachirobei, but his staff remained loyal. Then those adversaries bought a house next door to Echigoya, built a toilet close to the Mitsui kitchen, and let their sewage overflow into it. Hachirobei tried to change the location, which he already had outgrown, but whenever he found a suitable building his tormentors managed to prevent his leasing it.
Finally Hachirobei discovered a house for sale in Surugacho, near Nihombashi, and bought it secretly. When the remodeling of that new shop was nearly completed, there was a disastrous fire, one of the frequent conflagrations known as "the flowers of Edo." All of Honcho's high-class shops, along with Echigoya, were burned down; but Hachirobei was able to open his new establishment in Surugacho almost immediately and enjoyed a tremendous advantage thereby. Soon after the fire Hachirobei first put up his famous signboard, still preserved in the Mitsui museum, announcing Genkin, Kakene nashi—cash only, fixed prices.
The historian Arai Hakuseki, a contemporary of Hachirobei, wrote in his book Shinsho, a collection of essays: "Echigoya of Surugacho has two stores in Edo and an authorized exchange house for the shogunate. One of the stores deals in dry goods [presumably silks] and the other sells cotton. It is said that the two stores have combined daily sales amounting to 1,000 ryo, or 360,000 ryo a year, on a cash basis."(2)
By that time at least seven merchants had begun to imitate Echigoya's methods. Some adopted its emblem and even its name, which was becoming almost a generic term for the cash-payment, one-price style of merchandising. After the move to Nihombashi, Mitsui stopped using the "nailpuller" crest and designed a new one, which has survived with slight modification to the present. An additional motive for the change was the fact that the founder of Edo's famous Yoshiwara brothel district, Shoji Jin'emon, used a family crest almost identical with that of the Mitsuis, which in its turn was appropriated by another notorious whoremaster. This must have been humiliating to the Mitsuis, who were reputed for their sobriety and rectitude. But there really was no escape from imitators: a later brothel keeper in Yoshiwara used to lure the cheapskate trade by distributing a handbill bearing a picture quite similar to Echigoya's sign, advertising ladies of the night for "spot cash, at fixed prices."
The Surugacho site was considered the most attractive commercial location in Edo. It was so named because on clear days the view of Mount Fuji resembled that seen from Suruga Province (now called Shizuoka Prefecture). As business swelled, Hachirobei added lines of merchandise, especially cheaper cottons and pongee, appealing to families of lower-ranking samurai and to commoners of slender means. As the premises expanded, Echigoya became one of the sightseeing features of the city, whose population had reached half a million by 1700. The shop was a favorite subject for painters, and inspired a seemingly endless series of colored woodblock prints. Original impressions of such prints can still be found in Tokyo's curio shops, which indicates that the editions were quite large.
Long before the concept of advertising had made its impact upon the West, Hachirobei and his sons were masters of indirect persuasion. The weather in Edo being unpredictable, Echigoya's customers not infrequently were surprised by rainstorms. This gave Hachirobei the idea of lending his customers oiled-paper umbrellas. On rainy days the streets of central Edo blossomed with them, each one conspicuously emblazoned with the Mitsui mark. Hachirobei also befriended playwrights, authors, and poets, who showed their gratitude by further enhancing Mitsui's public image in both speech and writing.
Before the end of the seventeenth century, Mitsui's staff of several hundred employees enjoyed a good many fringe benefits then scarcely known in Japan or elsewhere. It is recorded that employees were required to work for only a specified number of hours, and were given regular rest periods during the course of each day. Some thought was given to health and sanitation, and decent dormitories were provided. Echigoya gave clerks on-the-job training in manners, speech, and personal appearance; and for those with seniority a rudimentary profitsharing system was established. To keep track of such a large volume of business, Hachirobei originated a form of double-entry bookkeeping similar to that used in Europe.
As Echigoya flourished Hachirobei set up branch establishments in Kyoto and Osaka, anticipating the chain store system popularized in America about 1860 by the Atlantic & Pacific Tea Company. However, a competitor, Iseya (which also originated in Matsusaka), seems to have anticipated Echigoya by setting up a chain of textile outlets in all the wards of Edo even before the Mitsuis began branching in earnest.
Echigoya was situated almost exactly where its direct descendant, the main Mitsukoshi Department Store, stands today, in Tokyo's central Nihombashi district. Antedating John Wanamaker's emporium in Philadelphia by almost two hundred years, Echigoya may have been the world's first department store. In 1700 it was Japan's largest store, just as Mitsukoshi is today. But Echigoya would be quite unfamiliar to modern shoppers, who expect quick service. The customers, ducking in under the noren, the short curtains hung in doorways, found themselves in a great hall. A raised platform covered with sweet-smelling tatami was its only fixture. Greeted politely by one of the chief clerks, customers would remove their wooden clogs or their sandals and take seats on the matting or upon silk cushions. The clerk would engage them in light conversation as tea was served. According to the status or interests of the customer, the chatter would turn to art, literature, poetry, some titillating scandal involving a popular geisha, or a new play at the Kabuki-za. Only after such niceties had been observed would the customer be expected to turn his attention to bolts of material brought from the warehouse by apprentices.
Echigoya attained great fame during the Genroku era (1688-1704), when the culture of the new urban bourgeoisie reached full flower. The wealth of the chonin had evoked the so-called floating world—ukiyo—of refined but evanescent pleasures that inspired artists, poets, playwrights, and novelists. This was also the high point of Kabuki, the theater of chonin, in which the glories and tragedies of samurai life were presented. One of the most talented novelists of the period was Ihara Saikaku, son of an Osaka merchant and author of Nihon Eitai-gura (Japan's Eternal Treasure House). This true-to-life book describes leading merchants of the day and relates wittily the ways in which they made their fortunes.
Of Echigoya, Saikaku wrote: "At Surugacho, a man named Mitsui Kuroemon [Hachirobei] opened a shop of 9 ken by 40 ken [roughly 54 feet by 239 feet], adopting the cash-payment, fixed-price system. There are forty-odd clerks, each engaged in a different category of business. For example, one is handling brocade, two men are selling silks from Hino and Gunnai, one is in habutae [a smooth silk], one in says [a textured silk]. One sells hakama [a skirtlike garment for men] and another woolens. Thus divided, they sell velvet by one-inch squares, brocade large enough to make a tweezer case, or red satin enough to cover a spear insignia. When ceremonial costumes are required in a hurry, the shop lets the servants wait and has the regalia made up immediately by several dozens of their own tailors.... To look at the shop owner, he appears no different from others, with his eyes, nose, and limbs in the usual arrangement; but he is clever at his business. This is an example of a really big merchant."(3)
Chapter 3—The Source of Happiness is Prudence
Seventh-century Japan, disdainfully aloof from the outside world and socially constrained in the web of feudalism, is mistakenly believed to have been a backward country. Actually it was relatively advanced, comparing favorably with Elizabethan England economically and with the Celestial Empire culturally. There were innumerable laws and regulations to prevent change, yet a new economic system was stirring within the body of the old; and a new bourgeois class, with its matching culture, was asserting itself with brash disregard for social barriers.
At the time Hachirobei appeared upon the business scene the groundwork for industry had already been laid. Handicrafts were well developed, and each province produced its own specialties in amounts exceeding local requirements. The level of technical competence was high, and division of labor in the workshops made production reasonably efficient. Transportation by land and sea was slow but adequate. The sankin-kotai system instituted by Shogun Iemitsu in 1634 had improved the highroads leading to Edo from different parts of the country. And a well-organized distribution system made it easy to exchange agricultural and industrial products for money.
There had been a steady advance in the yields of farms, and rice was more plentiful than it had ever been. But the daimyo, to meet mounting expenses, exacted larger and larger shares of the peasants' crops—usually fifty percent or more—and reduced the rice stipends allotted to their samurai. The crushing poverty of the countryfolk drove more and more young men to the cities to seek employment, and the wives and daughters of impecunious samurai, like those of peasants, eked out a living in domestic industries. Under these circumstances merchants were able to accumulate capital that was not laggard in mating with the emerging proletariat to beget more enterprises.
Thus Hachirobei's world, although feudal in concept and structure, showed many resemblances to the precapitalistic economies of Europe. From his phenomenal success in business, one can assume that Hachirobei had a basic understanding of this paradoxical economy and the rich opportunities it offered for the future. But being a realist, he recognized that the big sums of money needed for increasing trade and industry were still locked in the coffers of the bakufu. He also knew that merchants were still at the mercy of aristocrats and that without official patronage he could lose his fortune overnight.'
The shortest road to security was to become an official purveyor to the government. In those days the bakufu procured its fabrics and apparel from six houses of gofuku-shi (something like "kimono masters"), whose appointment was hereditary. Breaking into this monopoly was next to impossible, but the sagacious Hachirobei found a way to do so. One of his relatives from Matsusaka, a go champion named Doetsu, was being employed to play exhibition matches and teach the game to bakufu officials. Doetsu's work brought him into contact with Lord Makino Narisada of Bingo, an influential adviser to the Edo court. Hachirobei persuaded Doetsu to put in a good word for Echigoya, and this made it possible for him to become acquainted with Makino. He hewed to his purpose so diligently that at last, in 1687, "the shunned" Echigoya was appointed a supplier of cloth to the bakufu.
At this time Hachirobei's residence was in Kyoto, so he delegated his eldest son, Hachiroemon Takahira, to manage the business with the bakufu in Edo. Takahira must have done his work well, for two years later, in 1689, the Mitsuis were made purveyors of apparel, ornaments, and personal accessories to Shogun Tsunayoshi. In this position they held the highest rank attainable by townsmen and were given a suitable dwelling with a frontage of thirty-six feet.
The honor was great, of course, and kimono masters usually basked complacently in their privileged status. But the elder Hachirobei ridiculed them as not being real businessmen. "Don't forget that we are merchants," he used to tell his sons. "Our trade is the most important thing; official business is just an ornament." This warning reflected the fact that purveying to the shogun was troublesome, and sometimes unprofitable, because of long delays in payment. Nevertheless, Hachirobei accepted every preferment, profitable or otherwise, with a show of gratitude, and his motives are easily guessed: merchants, importuning clients to pay their debts, made powerful enemies and needed powerful protectors; such ambitious schemes as those of Hachirobei could not be realized without influential connections; and the timely information necessary for survival in those uncertain days could best be picked up in court circles.
The intelligence of most interest to Hachirobei was that concerning the circulation of money, the medium so essential to trade. Even before moving to Surugacho he had managed a small exchange house adjacent to Echigoya, and in 1683, after combating the guild for ten years, he was permitted to establish his own. Since the money-changers of Edo were concentrated around Surugacho, he was continually in touch with fluctuations in the relative values of gold, silver, copper, and iron monies, as well as with the dubious sorts of scrip issued by daimyo. Within eight years he had established similar exchange brokerages, called ryogaeya, in Kyoto, the imperial capital, and in Osaka, where the bakufu's treasury was located. With this network of ryo-gaeya, Hachirobei was able to eliminate the high commissions he had been charged for settling his accounts with suppliers and to collect such fees from fellow merchants who lacked similar exchange facilities.
Even in those days the ryo-gaeya were performing the basic operations of modern banks, accepting deposits, granting loans against collateral, discounting notes, and issuing trade vouchers that also served as banknotes. Such vouchers had only local circulation until Hachirobei expanded the business into a nationwide bill-of-exchange system. He was scrupulous in his operations, and to insure probity he placed each of the three ryogaeya under the management of one of his sons, with the stipulation that the position was to be hereditary. The Mitsuis' reputation was so unblemished that their "wrapped money," bearing the seal and signature of the respective manager, usually was accepted at its face value without being counted.
Most significant for the fortunes of the House was Hachirobei's idea of reforming the bakufu's money-transfer system. In 1691, when his Osaka exchange shop was opened, the House of Mitsui became an official money-changer for the bakufu's treasury. From then on banking was Hachirobei's main business, and although the Echigoya shops continued to grow apace, his plans were devoted to high finance rather than to merchandising.
He had long observed that, while Edo's merchants bought foodstuffs and merchandise in Osaka and sent money there in return, the government was collecting taxes from the same region and sending the coins to Edo. Such transfers of currency were made by way of the Tokaido, the highroad from Edo to Kyoto, and trains of horses laden with senryobako, the boxes containing one thousand ryo of gold or silver, could be seen passing each other—going in opposite directions. This cumbersome and redundant method was also dangerous, inasmuch as highway robbery was not uncommon.
Hachirobei's reputation was so good that he was able to persuade the treasury officials to adopt his system, already perfected, of sending remittances by money order instead of by cash. Thereafter, as money accumulated in the treasury it was loaned to Osaka's money-changers. They in turn loaned it to merchants, who used the funds to purchase commodities for shipment to Edo. When delivery was completed the wholesalers in Edo would pay the local representative of the respective ryo-gaeya, who would then repay the original loan to the bakufu in Edo. At first the treasury allowed 60 days for repayment, but later extended the period to as long as 150 days, without interest. Thus the exchange brokers were able to relend the money at high interest rates and to make a generous profit from this simple operation.
Naturally, all the big ryo-gaeya were anxious to get a share of this business, but only twelve were appointed as o-kawase, or honorable money-exchangers, in 1691. Ten of them formed a partnership called junin-gumi, the ten-man company; and the eldest Mitsui son, Hachiroemon Takahira of Kyoto, and his brother Jiroemon Takatomi, representing the Edo headquarters, constituted the ninin-gumi, or two-man company. Later this was expanded into the sannin-gumi, or three-man company, when their brother Gennosuke of Osaka was appointed to the group.
Those thirteen money-changers, actually bankers by then, were elevated to a special status with the bakufu's accounting agency, being listed in official gazettes and privileged to greet the shogun's family at the ceremonies of the New Year. This was the greatest honor ever accorded members of the despised merchant class; but more important to the aging Hachirobei was the fact that his sons were firmly entrenched near the source of political power.