The Mitsui Bank, Ltd. Business Information, Profile, and History

History of The Mitsui Bank, Ltd.

It is commonly believed that the Mitsui zaibatsu, or conglomerate, started its business as a bank. In fact, the company began trading in textiles and entered banking only after Takatoshi Hachirobei, a founder, decided in 1683 that currency would soon replace the barter system. That year Mitsui purchased a money exchange. This exchange began a slow, steady expansion after its appointment as the Tokugawa government's fiscal agent in Osaka. Mitsui's dry-goods business, meanwhile, declined steadily due to poor management.

In the mid-1860s, Mitsui switched its allegiance to rebel Meiji forces from the failing Tokugawa government, which had repeatedly levied costly tax assessments against the company. After the restoration of the Meiji emperor, Mitsui lobbied for and won a highly favored status in government. By the early 1870s, Mitsui held so much money for the government that it was basically a state treasury.

Rizaemon Minomura, the Mitsui director who was the architect of the company's rise to power, strongly advocated moving the firm to Tokyo, the new center of government and commerce. Once there, Mitsui began taking a more active role in underwriting industrial ventures. After an initial failure in international trading, Mitsui built up a domestic trading network and secured several government and military contracts. Reentering international trade some years later, Mitsui established numerous foreign offices, and in 1876 the Mitsui Bank was incorporated as a separate entity.

The Mitsui Bank served as the exclusive finance agent for the Mitsui trading company, called the Bussan, which had discovered a new and highly profitable trade in cottons and textiles. But, unhappy with its increasingly costly dependence on rival Mitsubishi for shipping and warehousing services, the Mitsui Bussan created its own shipping company. A tremendous bout of competition between the two companies ensued, and Mitsui eventually lost. As the underwriter for the Mitsui Bussan, the Mitsui Bank emerged financially exhausted.

But the bank benefited greatly from its privileged position in government. In addition, the Mitsui companies experienced unprecedented growth after Hikojiro Nakamigawa, a talented businessman and former president of the Sanyo Railway, joined Mitsui Bussan in 1891. As senior director, Nakamigawa dismissed redundant personnel and launched a concerted effort to develop Mitsui's industrial divisions. He also introduced the motto "people make Mitsui," a clever response to its rival's assertion that "organization makes Mitsubishi."

Mitsui again profited from its involvement in a military conflict, this time the Sino-Japanese War of 1894 to 1895. A recession following that war, however, halted the company's growth. Furthermore, Nakamigawa died in 1901, leaving the directorship to his rival and predecessor, Takashi Masuda. Masuda emerged from years of semi-retirement determined to shake Mitsui out of stagnation. He introduced foreign-exchange services, secured special trading rights for Mitsui in China, and even proposed purchasing Manchuria in 1911. Two years later he established a Chinese subsidiary, Chogoku Kogyo (China Industries Company).

Although it was a separate company, the Mitsui Bank was very broadly influenced by the Mitsui Bussan and its directors; Masuda in many ways retained authority over the bank's director, Shigeaki Ikeda. Ikeda distinguished himself at the bank by providing Masuda and his successor, Takuma Dan, with no surprises.

Mitsui at this time became a focal point for criticism by a right wing military faction that believed the zaibatsu should be destroyed because they had become too powerful. As a result of this group's rise to power, Takuma Dan was assassinated in 1932. Masuda designated Ikeda, a more neutral figure, to run the Bussan and Naojiro Kikumoto was named chairman of the bank.

When the militarists came to power, a centralization of power took place in industrial as well as government circles. Ikeda, in effect leader of both the Bussan and the bank, was additionally named governor of the Bank of Japan in 1937, and minister of finance and minister of trade and industry in 1938. He participated in the government's policy of expansion, supporting the colonization of Manchuria and the war against China, and later against the United States. The Mitsui Bank, meanwhile, was renamed the Teikoku Bank in 1943, following its merger with the Dai-Ichi Bank. Teruo Akashi was named chairman of the new bank. The following year, Teikoku absorbed the Jugo Bank, at the time about one-tenth the size of Teikoku.

When World War II ended in 1945, Ikeda was designated a "Class A war criminal" and purged from public life by the occupation authority. He died in 1950 at the age of 84.

Chairman Akashi was replaced by Junshiro Mandai in 1945. Mandai and six others, however resigned in 1946, shortly before the occupation authorities were to purge them as well. Kiichiro Satoh was then elected president of the bank. After the war the occupying authorities imposed a series of new industrial laws that eliminated the zaibatsu system by breaking the conglomerates into hundreds of smaller companies. The Dai-Ichi Bank was separated from Teikoku in 1948, and Teikoku was banned from reestablishing ties with former Mitsui companies. Teikoku, however, was designated an authorized foreign-exchange dealer in 1949.

The bank was permitted to establish correspondent agreements with American banks in 1950, which laid the groundwork for the reestablishment of Mitsui's international operations. After reopening offices in London, Bombay, and Bangkok, Mitsui incorporated an IBM punch-card computing system that permitted the bank to centralize more of its operations at its head office.

In 1954, following the relaxation of antimonopoly laws in 1949 and in 1952, Teikoku reverted to its former name, Mitsui Bank. Increasingly the Mitsui Bank began to conduct more business with the former zaibatsu companies. With an international network capable of assembling information on foreign markets in place, the zaibatsu began to re-form as a more loosely organized keiretsu, or banking conglomerate. This recentralization of industry was permitted by the government to encourage faster recovery and industrialization because of a perceived threat from communists on the Asian mainland.

In the meantime, since the bank's ability to grow was restricted by laws that prevented the establishment of more branch offices, Satoh led a campaign to increase deposits at existing branches.

Satoh was made chairman in 1959, and was succeeded as president by Masuo Yanagi, a career Mitsui employee, who in 1961 initiated an effort to control the bank's lending activities more efficiently. The rapid growth of the economy resulted in periods of simultaneous demand for loans and deposits; corporations borrowed as consumers spent. The addition of new consumer lending projects and the reestablishment of international banking activities resulted in greater liquidity and mobility, and made the bank more competitive.

The Mitsui Bank continued to bring itself closer to the public by marketing financial products specifically for private savers. In 1968 it merged with the Toto Bank, a small, consumer-oriented bank whose 16 branches greatly strengthened Mitsui's presence in Tokyo.

Kyubei Tanaka, who succeeded Yanagi in 1965, was himself succeeded in 1968 by Goro Koyama. Koyama presided over the widespread computerization of Mitsui and ordered the improvement of communications between branches to accommodate people who lived in suburbs but worked in the city.

Also in 1968, Mitsui participated with the Sanwa Bank in the creation of a national credit card company, the Japan Credit Bureau. In an effort to circumvent regulations limiting the number of a bank's branches, Mitsui and the Heiwa Sogo Bank concluded an agreement to service each other's customers, an agreement that was subsequently expanded to include other banks. During the early 1970s, the bank introduced automatic teller machines, which allowed depositors to withdraw money at any hour and greatly reduced labor costs for the bank.

The decision to remove the United States from the gold standard and the subsequent revaluation of the British pound had severe impact on the Japanese banking industry. The Mitsui Bank, which had grown heavily involved in international transactions, was forced to reorganize the following year. But, although profits were squeezed, the bank's capital and deposits reached new heights. Despite a second shock created by the OPEC oil embargo of 1974, the bank remained fairly stable, owing to conservative management and successful risk minimization.

Under President Joji Itakura and his successor Kenichi Kamiya, the Mitsui Bank became a much more business-oriented financial institution, participating in the establishment of special capital groups that oversaw the development of emerging companies breaking into expanding markets. One such venture included a 19-company collaboration on new software technologies. Through Bussan-sponsored monthly meetings, the Mitsui Bank coordinates its business with that of the approximately 40 members of the Mitsui Group, including Toshiba, Oji Paper, and Sapporo Breweries.

As Japan entered a period of lower, more stable growth in the early 1980s, the Mitsui Bank restructured in order to emphasize its business in the consumer and corporate fields and develop groups of market specialists. As part of the "Century Ten" plan, the restructuring was designed to make Mitsui a more competitive bank for the 1980s. Part of that strategy included a shift away from sheer volume (which is percentage oriented) toward more stable flat-fee business. The bank also introduced CMS, a cash-management system that linked its newly established continental headquarters in New York, London, and Tokyo.

In response to the Sumitomo Bank purchase of an interest in the American investment bank Goldman Sachs--a move that greatly strengthened that bank's position in international securities markets--the Mitsui Bank established closer relationships with Nomura Securities and Yamatame Securities.

Kamiya was promoted to chairman in June of 1988, and was succeeded as president by Ken-ichi Suematsu. The bank has repeatedly named like-minded men to the presidency. While that contributes to greater stability and continuity in management policies, critics have pointed out that it also created an army of yes-men. Regardless, the Mitsui Bank remains one of Japan's largest financial institutions. In August, 1989 Mitsui Bank and the Taiyo Kobe Bank announced that they would merge in April, 1990 to form Mitsui Kobe Bank, with about ¥40 trillion in assets. The merger, which will create the world's second-largest bank, can only strengthen both banks' positions in the rapidly changing financial world.

Principal Subsidiaries: Mitsui Finance Asia Ltd. (Hong Kong); Mitsui Financial Futures (Singapore) Pte. Ltd.; Mitsui Finance Australia Limited; Mitsui Manufacturers Bank (U.S.A.); Mitsui= Bank of Canada; Mitsui Finance Trust Company of New York (U.S.A.); Mitsui Finance (Switzerland) Limited; Mitsui Finance International Limited (U.K.); Mitsui Finance (Germany) GmbH; Mitsui Bank (Luxembourg) S.A.