General Zaibatsu and Financial/Industrial Zaibatsu

As seen in Cases 4 and 5, Mitsui and Mitsubishi both formed a zaibatsu by breaking away from political powers, appointing salaried managers, and pursuing industrialization. The drastic changes in the business environment since the opening of the ports at the end of the Edo period had expanded business opportunities, and some other owner-managers (aside from those at Mitsui and Mitsubishi) also aimed to form their own zaibatsu. However, from a long-term perspective, these zaibatsu turned out to be very different in nature. Few “general zaibatsu” other than Mitsui and Mitsubishi successfully grew their businesses in all areas of mining, manufacturing, logistics and finance. The majority focused on one of these four areas, such as becoming “financial zaibatsu” or “industrial zaibatsu.” For convenience, the term “industrial zaibatsu” as used here to collectively refers to zaibatsu engaged in mining, manufacturing, and logistics.

We will focus here on Zenjiro Yasuda as the founder of a financial zaibatsu and Soichiro Asano as the founder of an industrial zaibatsu. Both were born in what is now Toyama Prefecture, and both are notable for their close collaboration.

“Yasuda Zenjiro” by Tsunehiko Yui

Historian Tsunehiko Yui provides an excellent biography of Zenjiro Yasuda in his book, “Zenjiro Yasuda: Good Things Come to Those Who Work Out a Strategy” (Minervashobo, 2010). I once wrote a book review in the periodical Japan Business History ReviewFootnote 1 that I would like to share here.

Despite the fact that he single-handedly built the Yasuda Zaibatsu, one of the “four major zaibatsu” in prewar Japan, few critical biographies of Zenjiro Yasuda have been published to date. However, Tsunehiko Yui’s book in “Zenjiro Yasuda: Good Things Come to Those Who Work Out a Strategy,” fills this lacuna. The book is organized as follows:

  • Preface

  • Chapter 1: From Hometown to Edo, Managing Yasuda-ya – Peddling, Servitude, and Independence

  • Chapter 2: Meiji Restoration Reforms and Zenjiro Yasuda – The Accumulation, History, and Substance of “Extraordinary Wealth”

  • Chapter 3: From Money Exchanger to Banker: The Third National Bank and Yasuda Bank

  • Chapter 4: Establishment of the Bank of Japan and Zenjiro Yasuda – Previously Unknown Activities and Roles

  • Chapter 5: Diversification and the Formation of Zaibatsu: Rapid Growth and Its Characteristics

  • Chapter 6: Great Achievement as a Banker and the Other Side of the Story: The Failure of Industrialization and the Limits of Modernization

  • Chapter 7: Loneliness in Later Years and Death: The Fate of a Banking Champion

  • Appendix, References, Afterword, Zenjiro Yasuda Timeline, Index of Personal Names and Matters

Since “Zenjiro Yasuda” is a critical biography, the chapters are arranged chronologically and discuss Zenjiro’s life in detail. Chapter 1 begins with Zenjiro’s birth in 1838 (Tenpo 9) and follows his life up to relocation to a shop in Nihonbashi Kobuna-cho in 1866 (Keio 2); Chapter 2 covers the period until shortly before his appointment as the exchange commissioner by the Ministry of Justice in 1874 (Meiji 7); Chapter 3 leads up to the opening of Yasuda Bank in 1880; Chapter 4 continues to his appointment as a director of the Bank of Japan in 1882 and response to the 1890–1891 economic depression; Chapter 5 covers the period until just before his 60th birthday in 1897; Chapter 6, from his 60th birthday to 1908; and Chapter 7 continues from 1909 to his unexpected death in an attack by thugs in 1921 (Taisho 10), all discussed in detail.

The biography reveals previously little known facts , making full use of primary historical documents and findings from a vast amount of earlier research. Examples include the descriptions of Zenjiro’s toy peddling business in Edo, his speculative actions over Bunkyu Eiho coins and subsequent failure, his business diversification immediately after the Meiji Restoration, the exposure of the shogunate’s official commerce and Dajokan bill transactions, his aggressive business development effort in Tochigi Prefecture, the relationship between Third National Bank and Yasuda Bank, and his activities as a Bank of Japan director. These are the book’s main highlights. A notable example is the description of relations between the Third National Bank and the Yasuda Bank: “It is undeniable that the Third National Bank was ostensibly an open bank, which limited Zenjiro’s ability to exercise his business acumen and ability as he wished. On the other hand, the interior workings of the Yasuda Bank, owned by the Yasuda family, was a bank whose interior workings were unknown to the outside, so that Zenjiro could operate as he wished, sometimes using the former government office or Yasuda Shoten (real estate business) to fully demonstrate his business ability in accordance with his own interests” (p. 104). These are fascinating and persuasive sentences.

An important milestone in the discovery of primary historical documents was the publication of “Yasuda Zaibatsu” (Nikkei Publishing Inc.) in 1986, which was edited by the author Tsunehiko Yui. How this book came to be is described in its “Preface”:

The author was in charge of covering the entrepreneurial activities of the company’s founder, Zenjiro Yasuda, and was able to clarify how and to what extent he accumulated his “extraordinary wealth” in the first year of the Meiji era by examining the account ledgers in Zenjiro’s own handwriting (known as the “Actual Assessment Report”). However, the investment activities and their results from other periods were not clear from the documents available at the time.

Later, however, Mr. Hajime Yasuda, the third head of Yasuda Zaibatsu (then chairman of Yasuda Life), who had read “Yasuda Zaibatsu,” allowed me to see the “Diary” and “Notes” that had been kept and stored deep inside the warehouse as well as to photocopy all of these at the General Affairs Division of Yasuda Real Estate Co. for the purpose of advancing research on his grandfather. These are valuable handwritten documents spanning 30 years of the Meiji era, and I was strongly motivated to write his biography by carefully studying these documents (pp. i–ii).

Thanks to this type of archival research, Yui uncovered much previously unknown information.

When we read a well-written biography, we are strangely moved more by stories of failure than by the protagonists’ stories of success. The same is true with this book.

Although Zenjiro Yasuda displayed unparalleled talent in the financial business, he was unable to achieve any notable results in business management outside of finance. In contrast, Soichiro Asano, a fellow [Toyama] countryman, lacked financial resources but was successful in his business. As a result, Zenjiro’s involvement in business management eventually takes the indirect form of financial support for Soichiro Asano.

After the successive deaths of his adopted sons, whom he had expected to become his business successors, Zenjiro Yasuda handed over the patriarchal position to his son-in-law, Zenzaburo, in 1913. However, Zenzaburo subsequently came into conflict with Zenjiro’s own children (including Zennosuke), and eventually Zenjiro broke with Zenzaburo and his wife Teruko (Zenjiro’sown beloved daughter), and at the age of 83 returned to the frontline of business management in 1920. It is possible to attribute Zenjiro Yasuda’s inability to cultivate successors may be considered his greatest failure.

Passages like this strongly impress readers. Yui also provides an in-depth discussion of Zenjiro Yasuda’s failures in a separate article, “The Evolution and Sustainability of Zaibatsu: The Rapid Rise and Setbacks of the Yasuda Zaibatsu” (included in ‘Shinka no keieishi: Hito to soshiki no firekisibirithi (Evolution in Business History: The Flexibility of People and Organizations)’ Takeo Kikkawa and Masakazu Shimada, eds. Yuhikaku, 2008, Chapter 4). In that article, Yui analyzes the business activities of Zenjiro Yasuda who built up the Yasuda Zaibatsu during his own lengthy lifespan, making Yasuda Zaibatsu one of the “Big 4” zaibatsu. While presenting new details about his activities as a Bank of Japan director, and the support he received from politicians influenced by the Satsuma and Choshu feudal domains, the article projects the evolution of Zenjiro Yasuda the man onto the evolution of the Yasuda Zaibatsu as a whole. In the process, we observe the conflict and breakup with his adopted son, Zenzaburo, his devotion to his business partner, Soichiro Asano, and the crisis that ensued, suggesting the difficulty of sharing or transmitting a culture that leads to organizational growth.

Yui’s book “Zenjiro Yasuda” and his article “The Evolution and Sustainability of Zaibatsu” delve into the succession problems with dramatic flair. On the other hand, they both leave one wishing that Yui had delved deeper into the psychology of Zenjiro Yasuda to describe his relationship with Soichiro Asano, since Zenjiro must have felt considerable conflict about his dependence on Soichiro.

To be sure, lack of psychological analysis does not diminish the value of Yui’s study. Furthermore, Yui writes not only about the failures of Zenjiro Yasuda, but also about his shining successes. This book, describing the light and the shadows of Zenjiro’s life, will no doubt be read for many years to come as the definitive biography of Yasuda.

Brief Biography of Zenjiro Yasuda

Let us take another look at the life of Zenjiro Yasuda who was born in 1838 (Tenpo 9) in the castle town of Toyama. His childhood name was Iwajiro. His father, Zen-etsu (Zenjiro IV), had obtained the position of a low-ranking samurai in the Toyama domain when Iwajiro was a child. After attending a temple school in Toyama, Iwajiro lived a life of peddling and writing. In 1857 (Ansei 4), he moved to Edo in his second attempt to flee his hometown, and under the name Chubei he earned a living by working at a money-exchange store and peddling toys. In 1863 (Bunkyu 3), he became independent and in 1864 (Genji 1) he changed his name to Zenjiro, opening Yasuda-ya, a dried bonito shop and money changing business on Nihonbashi Ningyocho Dori.

Achieving success, Yasuda-ya changed its name to Yasuda Shoten in 1866 (Keio 2). In this regard, historian Kazuo Sugiyama notes:

Following its launch, in two years Yasuda-ya became a dedicated money changing operation, and changed its name. As Yasuda Shoten, the company grew by taking advantage of turmoil in money markets at the end of the Edo period and during the Meiji Restoration.

While his peers closed shop fearing violence by nativist ronin [masterless samurai opposing foreign influence], Zenjiro singlehandedly continued buying up old gold and silver coins. It was Zenjiro’s daring and agile activities that elevated Yasuda Shoten’s reputation. Zenjiro was the first to get wind of the government’s policy of using government bills as equivalent to regular gold and silver during the Meiji Restoration, and he purchased large quantities of Dajokan bills that had fallen to 30% of their original value. Obviously this purchase earned Yasuda Shoten a significant profit.

Yasuda Shoten later served as the treasurer for the Ministry of Justice, the Tokyo Prefectural Government, and other government agencies, and used this money to purchase Chitsuroku and Kinroku public bonds whose price had fallen to 70% of face value, making them a lucrative and stable investment. As the business grew, Yasuda Shoten began to implement a series of reforms such as creating a new clause regarding capital funds and around Meiji 10 (1877) adopted the balance-sheet method of accounting. Thus, Yasuda Shoten grew to effectively become a bank.Footnote 2

Zenjiro’s “bold and agile moves”—purchase of old gold and silver coins at the end of the Edo period, purchase of Dajokan bills immediately after the Meiji Restoration, and acquisition of the Chitsuroku and Kinroku public bonds—reflected his outstanding talent in finance that made him one of Japan’s leading bankers.

In 1877 (Meiji 10), Zenjiro established the Third National Bank in partnership with Hachiemon Kawasaki and Ichirozaemon Matsushita. Yasuda also reorganized Yasuda Shoten and opened Yasuda Bank in 1880. Why did he open the Third National Bank and Yasuda Bank in a span of only 3 years? Sugiyama explains: “Although the Third National Bank was authorized to issue banknotes, it was required to report its business to the government. Also, as a joint stock organization, it needed to respect the opinions of other influential shareholders, even though Zenjiro was the major shareholder. However, response to dramatic changes in the economic environment required decisive, prompt, and bold action under his own responsibility. Such freedom could only be ensured in a private company—this was Zenjiro’s thinking”.Footnote 3 Interestingly, this view is similar to Tsunehiko Yui’s perspective as described earlier.

After becoming a renowned banker, Zenjiro was appointed as Director and Head of the Discount Department of the Bank of Japan upon its opening in 1882. Henceforth, Yasuda continued to hold key positions at the Bank of Japan. At the same time, Zenjiro diversified his business beyond banking. Yet with the exception of the financial sector, most of Yasuda’s diversification efforts were unsuccessful. Historian Toshimitsu Asano elaborates:

Yasuda is often referred to as a financial zaibatsu. However, this characterization may be inaccurate. Zenjiro was an entrepreneur who aimed to diversify his business, a common practice among entrepreneurs at that time, and the number of businesses he invested in and managed was extensive. His first venture outside of banking was the insurance business, closely related to his existing business – Kyosai Gohyakumei Company (which later became Yasuda Life Insurance Company). However, he also took a strong interest in the so-called “industry” and his business scope was extensive. He invested in and operated almost equally in all of the following areas: sulfur mining, coal mining, nail-manufacturing, thread-spinning, iron, railroad, and shipbuilding industries.Footnote 4

Yasuda thus managed diverse businesses from various angles, but ultimately he could not sustain most of them.... The main reason for this seems to be that Zenjiro lacked a strong management staff around him. This lack of managerial staff was the major difference between Yasuda and Mitsui, Mitsubishi, and Sumitomo. Yasuda’s voracious appetite for business was fulfilled not by those in proximity who were involved in his businesses, but rather indirectly by the bold industrial entrepreneur, Soichiro Asano.Footnote 5

Historian Toshimitsu Asano believes that Zenjiro’s failure to diversify his business was due to his late start in appointing salaried managers and building up the managerial staff. Although Zenjiro did not succeed in commercializing his own “industry,” his financial contributions supporting other entrepreneurs’ attempts to commercialize their industries was highly significant. The main recipient of his support was Keijiro Amenomiya until the middle of the Meiji period, and Soichiro Asano thereafter. Asano will be discussed in the next section. Yasuda provided active support to Amenomiya, an energetic entrepreneur hailing from the Koshu region (present-day Yamanashi prefecture), who made a significant contribution to the emergence of the railroad industry in Japan, by investing in the Kobu Railway Company.

Zenjiro Yasuda retired from the business frontline in 1913 (Taisho 2). In 1921, he died tragically after being attacked by members of the Kokusui-kai (a right wing organization) at his villa in Oiso.

Brief Biography of Soichiro Asano

Explanation based mainly on Teratani, T. (1979). Asano Soichiro to Asano zaibatsu: Sangyo zaibatsu no keisei (Soichiro Asano and Asano zaibatsu: The formation of industrial zaibatsu). In op.cit., K. Nakagawa, H. Morikawa, & T. Yui (Eds.) The enlarged edition of basic knowledge on modern Japanese business history (pp. 129–130).

Soichiro Asano was born in 1848 (Kaei 1) in Imizu County, Etchu Province (present-day Himi City, Toyama Prefecture). He was involved in various businesses from his youth, but left his hometown after repeated business failures and moved to Tokyo in 1871 (Meiji 4). After working as a water seller and wood merchant, he settled down as a coal merchant.

While selling coal, he turned his attention to coke, which at the time was being discarded, as it had no known use. After confirming that coke could be used as fuel, he became a successful coke merchant. His success both as a coal and coke merchant caught the attention of businessman Eiichi Shibusawa, who offered Soichiro support.

Soichiro then turned his attention to the cement business. In 1881, he was granted a lease for the government-run Fukagawa Cement Works, his guarantor at the time Eiichi Shibusawa. After he successfully restructured the government-run Fukagawa Cement Works which had been forced to suspend operations due to poor performance, in 1883, the government sold the factory to Soichiro, who renamed it the Asano Cement Company. It grew steadily and became the core company of the Asano Zaibatsu.

In addition to the cement business, Soichiro became involved in various coal-related businesses, including the management of the Iwaki Coal Mine Company and of Tokyo Gas Company. Of these two companies, Eiichi Shibusawa was listed as a partner in Tokyo Gas.

Soichiro’s continued focus on fuels also led him to the oil business. Through the introduction of Eiichi Shibusawa, he imported and sold Russian oil through Marcus Samuel Trading Company (the predecessor of Rising Sun Oil Company and Shell Oil), and then turned to selling domestic oil produced by the Japanese company Hoden Oil. However, Soichiro’s own oil business came to an end in 1904 when it merged with Hoden Oil. In turn, Hoden Oil merged with Nippon Oil in 1921 (Taisho 10).

Through the transportation of coal and cement, Soichiro also became involved in shipping, establishing Toyo Steamship Company in 1896 (Meiji 29). The company grew rapidly during the boom years following World War I and became one of the largest shipping companies after Nippon Yusen and Osaka Shosen.

In addition, in cooperation with Zenjiro Yasuda, Soichiro, established the Tsurumi Maichiku Company in 1913 (Taisho 2), working on land reclamation for the Keihin Industrial Zone. He also established the Asano Shipyard in 1916.Footnote 6

As shown, Soichiro’s appetite for business was boundless. In 1918, he established the Asano Family Company as a holding company to control his subsidiaries in cement, coal, shipping, land reclamation, shipbuilding, and other businesses.

Although Soichiro aggressively diversified his business, he never fully entered the financial sector; Soichiro died in 1930. The only exception was his acquisition of Daigo Bank (Fifth Bank) in 1916 (Taisho 5), which he ran as Nihon Chuya Bank (later, Asano Chuya Bank), but the bank performed poorly and was sold to the Yasuda Zaibatsu in 1922, becoming once again Nihon Chuya Bank. Thus, Asano Zaibatsu was a typical industrial zaibatsu. Soichiro Asano died in 1930.

Cooperation Among Owner-Managers

As he developed his businesses, Soichiro Asano often received support from Eiichi Shibusawa. In this case, an owner-manager was helped by an investor-manager. It is noteworthy that Soichiro was also often supported financially also by Zenjiro Yasuda. Historian Yui describes the relationship between Yasuda and Asano in the mid-Meiji period as follows:

During this period, Zenjiro was not successful in managing modern industry. However, not all of Zenjiro’s effort toward industrialization failed. After Keijiro Amenomiya [who died in Meiji 36/1903], Zenjiro saw in Soichiro Asano the bold entrepreneurial spirit and managerial talent needed to tackle modern industry.Footnote 7

The first investment Zenjiro made for Soichiro Asano was in Toyo Steamship Company, established in April of Meiji 29 [1896] after the Sino-Japanese War. As is well known in the history of Japanese shipping, Toyo Steamship was intended to be an international liner to challenge the monopoly held by Nippon Yusen at that time. Soichiro Asano invited dozens of acquaintances from the Keihin [industrial region in Eastern Japan] area, including Eiichi Shibusawa, Kihachiro Okura, Zenjiro Yasuda, Sobei Iwade, Saburobei Oku, and Shinzo Tanaka, and gave a presentation about the establishment of the new company. Reportedly, Zenjiro was the first to openly support the idea.Footnote 8

In 1899, Yasuda Bank began lending to Asano Cement. Historian Tsunehiko Yui, referring to the relationship between Soichiro Asano and Zenjiro Yasuda during the World War I era, noted: “Soichiro Asano’s Toyo Stemship and Asano Cement were two of the companies that grew particularly rapidly during this period. Although Zenjiro had already retired, he trusted Asano and continued to invest in and finance these two companies, which he had already invested in, as quasi-Yasuda companies. The strong performance of Yasuda-affiliated banks during World War I was largely due to Asano’s unusually vigorous entrepreneurship.”Footnote 9

Historian Takeaki Teratani outlines the relationship between the Asano Zaibatsu and the Yasuda Zaibatsu: “The Asano Zaibatsu is an industrial zaibatsu that lacks a financial sector, and its weak capital base has often been highlighted, but through its close relationship with Yasuda, a financial zaibatsu, the two often worked together to resemble a single, general zaibatsu. Some view Asano as being in charge of the industrial sector of such a general zaibatsu.”Footnote 10 Both Soichiro and Zenjiro were owner-managers. In the process of Japan’s industrialization, owner-managers sometimes cooperated with each other, as evident here.