The Move Into Manchuria of the Nissan Combine It Is a Commonly
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Japanese Yearbook on Business History-1990/7 The Move into Manchuria of the Nissan Combine Masaru UDAGAWA INTRODUCTION It is a commonly known fact that international relations involving Japan worsened after the outbreak of the Manchurian Incident in September1931,and Japan became increasingly isolated interna tionally.Likewise,in the1930s,particularly in the latter half of the decade,a variety of pressures were applied to the activities of busi nesses as a result of increased intervention by the military in the political and economic arenas and a thrust towards a controlled economy.In the midst of such changes in the political and eco nomic environment,foreign investment in Japan diminished,and foreign businesses already in Japan left the country one after the other. On the other hand,throughout this period the Japanese econ omy continued to expand,and rapid progress was made in the heavy and chemical industries.This was because the technological improvements and efforts at rationalization made by businesses during the recession of the1920s finally bore fruit in the midst of This study was made possible by the1990Special Research Subsidy Fund of Hosei University. 4JAPANESE YEARBOOKON BUSINESSHISTORY-1990/7 the increase in demand for munitions following the Manchurian Incident and the acceleration of exports and suppression of im ports that followed the yen exchange collapse after the export of gold was banned in December1931.The invigoration of business activities,with the progress of the heavy and chemical industries forming the core,inspired entrepreneurs with confidence and heightened and encouraged their entrepreneurial spirit. Their business activities,however,were to become replete with bitter experiences after the outbreak of the Sino-Japanese War in July1937.The expansion and prolongation of the Sino-Japanese War spurred Japan's international isolation,with the result that the Japanese government planned the establishment of an•gEco nomic Bloc of Japan,Manchukuo,and China.•hFor entrepre neurs,the raw materials and natural resources of Manchuria and China were certainly an attraction.But cooperation in the estab lishment of such an economic bloc meant approval for the mili tary's aggressive actions and toeing the military line.The majority of entrepreneurs forming the mainstream of the business world at the time were critical of the military's aggressive actions.1The rea son is that the expansion and prolongation of the war would inev itably lead to confrontation and friction with the democratic ountries,particularly the United States and England.Theyc feared the emergence of such a situation. For this reason,from the latter half of the1930s on,tne entre preneurs fronted up to the extremely difficult,and mutually con tradictory,tasks of cooperation with the establishment of an economic bloc of Japan,Manchukuo,and China,an early solution to the Sino-Japanese War,and maintenance of harmonious rela tions with the United States and England. 1On this point ,the following two works can serve as the first point of ref erence.Hideichiroö Nakamura,•gThe activities of the Japan Economic Fed eration,•hin Dorothy Borg and Shumpei Okamoto,eds.,Pearl Harbor as History:Japanese American Relations1931-1941(New York:Columbia Uni versity Press,1973),411-20;and Hidemasa Morikawa,•g1930nendai ni okeru kigyojin no ishiki•h[The attitude of entrepreneurs in the1930s],Shi no.624,1976. so UDAGAWA:Nissan Combine's Move into Manchuria5 The purpose of this essay is to consider,as an instance of a busi ness that took up the challenge of these difficult tasks,the activities of the Nissan combine that moved to Manchukuo2in December of1937,called itself the Manchuria Heavy Industries Develop ment Corporation,and became the implementing body of the•g Five-Year Industrial Development Plan in Manchuria,•hand re late these activities with the international relations they entailed. HISTORY OF THE NISSAN COMBINE'S MOVE TO MANCHURIA The founder of Kuhara zaibatsu,Fusanosuke Kuhara,in Decem ber1926entrusted the rebuilding of Kuhara zaibatsu ,then on the verge of bankruptcy,to his brother-in-law,Yoshisuke Aikawa . After disposing of Kuhara zaibatsu's accumulated debts through the assistance of relatives and friends,Aikawa in December of1928 reformed Kuhara Mining,the key enterprise in the zaibatsu ,into a public holding company and renamed it Nippon Industrial Company(popularly called Nissan),and assembled the various en terprises of Kuhara zaibatsu under its umbrella. Thus reorganized and born,the Nissan combine,like other companies,felt the effects of the world panic that broke out shortly after it began operations,and it continued to experience recession. But in the midst of the revival and expansion of the Japanese eco nomy that opportunely followed the Manchurian Incident and the measure to ban the export of gold,the Nissan combine's business operations would recover.And then the Nissan combine carried out an aggressive and daring expansion strategy that had as its core a•gconglomerate strategy•hthat took full advantage of the public holding company functions and structure of the head office,Nippon Industrial Company(Nissan).As a result ,it achieved a rapid expansion,so that by June1937it controlled77 2In Japanese academic circles it is customary to put Manchukuo in quo tation marks,but because this is needlessly troublesome ,quotation marks will be omitted in this essay. 6JAPANESE YEARBOOKON BUSINESSHISTORY-1990/7 companies,including such powerful ones as Nippon Mining, Hitachi Engineering Works,Nissan Automobile Company,and Nippon Fishery,with a paid-up capital totaling473,630,000yen, and formed one giant industrial group.The scale of the Nissan in dustrial group at the time was such that it followed in size the Mitsui and Mitsubishi zaibatsus.3 Now,the Nissan combine,the third-ranking industrial group in the nation,suddenly moved its head office,Nippon Industrial Company,to Hsinking,the capital of Manchukuo(present-day Changchun in China)in December1937,changed its name to Manchuria Heavy Industries Development Corporation,and an nounced that it would become the implementing body for the Five-Year Industrial Development Plan for that country,thereby dealing a severe shock to Japan's business world. The opportunity for the move to Manchuria of the Nissan com bine head office was provided by the Manchukuo government and Japan's Kwantung Army stationed in Manchuria.The Manchu kuo government and the Kwantung Army announced in June 1936that,as the•gSecond General Outline of a Program for the Economic Construction of Manchukuo,•hand following the exam ple of the Soviet five-year plans,they would create a five-year plan funded at2,200,000,000yen and based on a•gone industry,one company system•hwith the South Manchuria Railway Company as the nucleus,and they would put this into effect from April1937. Before putting anything into effect,in autumn1936the Kwan tung Army invited industrial managers from Japan and sought their opinions of the five-year plan.4The following opinion,ex- 3Masaru Udagawa,Shinko zaibatsu[The new zaibatsu](Nihon Keizai Shinbunsha,1984),p.10.Nissan had the special characteristic of being a combine centered on the heavy and chemical industries.For the business history of the Nissan combine,see chapter1of Shinkozaibatsu. 4Those invited included ,besides Aikawa,Shingo Tsuda(president of Fuji Spinning Mills),Yunosuke Yasukawa(president of Toyo Takushoku), Nobuteru Mori(founder of the Mori combine),Shitagau Noguchi (founder of the Nitchitsu combine),and others. UDAGAWA:Nissan Combine's Move into Manchuria7 pressed by Aikawa,was noted carefully by Kwantung Army officers and Manchukuo officials: 1.To develop the resources and encourage industry in such a vast area as Manchuria,there are two methods,the line method that follows a theory of each single individual indus try by itself,and an integrated pyramid method.The line method is the one usually considered,and Manchukuo's special company system also belongs to this type.But if the line method,with its•gone industry,one company•hbrand of independent individual companies is not boldly abandoned on this occasion and resource development and industry construction not carried out in a comprehensive form on the basis of the pyramid method,then a five-year plan would be impossible to realize. 2.There is a need to acquire materials and technology,as well as capital,from advanced countries.Manchuria resembles America in that the land is vast and resources are abundant.Furthermore,because it has not been ruined by human mismanagement,an American-style large-scale de velopment is possible.If it were developed with the use of modern machinery from the United States,it would be pos sible to build up a sturdier,more powerful industry than Japan's.5 The five-year plan was put into effect from April1937as origi nally planned(on the basis of one industry,one company),but as a result of the outbreak of the Sino-Japanese War shortly after ward,there was an urgent need to establish a wartime bloc eco nomic structure that would integrate Japan and Manchukuo,and to build military supply sites in Manchuria,with the result that the five-year plan was revised to something double its size,with the main focus on the mining and manufacturing sectors.But it was thought to be difficult to put the expanded five-year plan success fully into effect at the time,with the South Manchuria Railway as the key element,for the Railway was busy with the construction of 5Manshukoku -shi Hensan Kankokai ,ed.,Manshukoku-shi[History of Manchukuo],vol.1(Kokusai Zenrin Kyokai,1970),pp.547-48. 8JAPANESE YEARBOOK ON BUSINESS HISTORY-1990/7 railways in occupied territories.On top of this,it was not an easy matter to obtain funds and materials needed for the five-year plan from Japan,which was feverishly engaged in the construction and expansion of the munitions industry sector.